Q4 2023 AtriCure Inc Earnings Call
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Okay.
Good afternoon.
Operator: Good afternoon. And welcome to AtriCure's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in listening mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.
And welcome to age or cure fourth quarter and full year 2023 earnings conference call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: We will be facilitating a question and answer session towards the end of today's call.
Speaker Change: As a reminder, this call is being recorded for replay purposes.
Marissa Baish: I would now like to turn the call over to Marissa Baish from the Gilman Group for an introductory comment. Great, thank you, and good afternoon. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call 513-644-4484 to have one emailed to you.
Speaker Change: I would now like to turn the call over to Marissa buys the Gilmartin group for introductory comments.
Marissa: Great. Thank you and good afternoon by now you should have received a copy of the earnings press release.
You have not received a copy please call 5136444484 to have one emailed to you.
Marissa Baish: Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control, including risks and uncertainties described from time to time in AtriCure's SEC filings. These statements include, but are not limited to, financial expectations and guidance, expectations regarding the potential market opportunity for AtriCure's franchises and growth initiatives, future product approvals, clearances, reimbursement, and clinical trial outcomes. However, AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statement.
Speaker Change: Before we begin today, let me remind you that the Companys remarks include forward looking statements forward.
Speaker Change: Forward looking statements are subject to numerous risks and uncertainties many of which are beyond atrix or control, including risks and uncertainties described from time to time in <unk> SEC filings.
Speaker Change: These statements include but are not limited to financial expectations and guidance expectations regarding the potential market opportunity for Atrix Earth franchises and growth initiatives.
Speaker Change: Sure product approval clearances reimbursement and clinical trial outcomes.
Speaker Change: <unk> results may differ materially from those projected.
Speaker Change: They procure undertakes no obligation to publicly update any forward looking statements.
Speaker Change: Additionally, we refer to non-GAAP financial measures, specifically revenue reported on a constant currency basis, adjusted EBITDA and adjusted loss per share a.
Marissa Baish: Additionally, we refer to non-GAAP financial measures, specifically revenue reported on a constant currency basis, adjusted EBITDA, and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website. And with that, I would like to turn the call over to Mike Carrel, President and CEO. Good afternoon, and thank you for joining us today.
Speaker Change: A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website.
And with that I would like to turn the call over to Mike Carrel, President and CEO.
Michael H. Carrel: Good afternoon, and thank you for joining us today too.
Michael H. Carrel: 2023 was an exceptional year at AtriCure, and I am proud to report a strong finish with fourth-quarter growth of 21%, showing robust momentum throughout our entire business. Our full-year revenue of $399 million represents 21% of 2022, our third consecutive year of above 20% revenue growth, and globally, we saw increasing adoption of our broad portfolio of products for the treatment of atrial fibrillation, the left atrial appendage, and postoperative pain. Our patient impact extended further than before, resulting in the achievement of our one millionth patient treated with AtriCure technology. In addition, our top line performance and increasing leverage drove $19 million of positive adjusted EBITDA in 2023, making significant progress towards sustained profitability throughout our business. Before sharing operational highlights of the fourth quarter of 2023, I would like to frame the opportunity in front of AtriCure now.
Michael H. Carrel: 2023 was an exceptional year at <unk> and I am proud to report a strong finish with fourth quarter growth of 21% showing robust momentum throughout our entire business.
Michael H. Carrel: Our full year revenue of $399 million represents a 21% over 2022, our third consecutive year of above 20% revenue growth and globally, we saw increasing adoption of our broad portfolio of products for the treatment of atrial fibrillation, the left atrial appendage and post operative pain or.
Michael H. Carrel: Our patient impact extended further than before resulting in the achievement of our one millionth patient treated with <unk> technology.
Michael H. Carrel: In addition, our topline performance. In addition, our top line performance and increasing leverage drove $19 million of positive adjusted EBITDA in 2023, making significant progress towards.
Michael H. Carrel: Towards sustained profitability throughout our business.
Michael H. Carrel: Before sharing operational highlights of the fourth quarter of 2023.
Speaker Change: I would like to frame the opportunity in front of a trick here now.
Michael H. Carrel: We identify markets where patients are underserved and create standards of care to improve these patients' lives. We know that creating new standards of care requires sustained investment and innovation in clinical science and comprehensive education and awareness.
Speaker Change: We identify markets, where patients are underserved and create standards of care to improve these patients' lives.
Speaker Change: We know that creating new standards of care require sustained investment in innovation.
Speaker Change: Clinical science and comprehensive education and awareness.
Michael H. Carrel: Investing across these areas has allowed us to unlock new opportunities over the last two decades, and we are now positioned to offer solutions for millions of patients worldwide. This translates to a more than $5 billion global market opportunity today with significant potential to expand our market opportunity in the future. AtriCure is in a unique position as a leader in each of our markets, with every market still significantly underpenetrated.
Speaker Change: Investing across these areas has allowed us to unlock new opportunities over the last two decades, and we are now positioned to offer solutions for millions of patients worldwide.
Speaker Change: This translates to a more than 5 billion dollar global market opportunity today with significant potential to expand our market opportunity in the future.
Speaker Change: <unk> is in a unique position as a leader in each of our markets with every market still significantly underpenetrated.
Michael H. Carrel: Therefore, we remain focused on driving adoption, as well as identifying and cultivating new opportunities to drive strong growth for many years to come. As such, we are reiterating our expectations for full-year 2024 revenue of $459 to $466 million, reflecting 15 to 17% growth over 2023. We are also reaffirming our expectations to achieve adjusted EBITDA of $26 to $29 million for the full year, with improvements annually thereafter as we progress towards positive cash flow. Now, we shift to highlights of the quarter and 2023, starting with the open ablation franchise, where our ablation solutions for the treatment of AFib are used concomitantly with open heart surgery. In the fourth quarter, we surpassed 10,000 patients treated with our Encompass Clamp and achieved the best quarter yet for Encompass Clamp sales, which accounted for nearly half of our U.S. open ablation revenue for the quarter.
Speaker Change: Therefore, we remain focused on driving adoption as well as identifying and cultivating new opportunities to drive strong growth for many years to come.
Speaker Change: As such we are reiterating our expectations for full year 2020 for revenue of $459 million to $466 million, reflecting 15% to 17% growth over 2023.
Speaker Change: We are also reaffirming our expectations to achieve adjusted EBITDA of 26% to $29 million for the full year with improvements annually thereafter, as we progressed towards positive cash flow.
Speaker Change: Now shifting to highlights of the quarter and 2023.
Speaker Change: Starting with the open ablation franchise, where our ablation solutions for the treatment of Afib or used concomitant to open heart surgery.
Speaker Change: In the fourth quarter, we surpassed 10000 patients treated with our encompass clamp and achieved the best quarter, yet for encompass clamp sales, which accounted for nearly half of our U S. Open ablation revenue for the quarter.
Michael H. Carrel: The uptake of this product has been extraordinary since the BOD commercial launch in early 2022. At the recent Society of Thoracic Surgeons Conference, I heard from many surgeons about the impact this device is having on patients, expanding our reach throughout cardiac surgery procedures. Globally, our open ablation franchise achieved 21% annual growth in 2023, showing a continued elevation over historical growth rates in this franchise. As we begin 2024, we are confident in the increasing adoption of the Encompass clamp in the United States and look forward to the European launch later in the year and other markets in the future. Next, turning to appendage management. Atriflip products for left atrial appendage closure in both open heart and minimally invasive procedures remain a foundation of our business. In many markets around the world, atrial clip devices are leading our growth as left atrial appendage management becomes the standard of care in cardiac surgery.
Speaker Change: The uptake of this product has been extraordinarily since the broad commercial launch in early 2022.
Speaker Change: At the recent society of thoracic Surgeons conference.
Speaker Change: I heard from many surgeons about the impact this device is having on patients.
Speaker Change: Expanding our reach through our cardiac surgery procedures.
Speaker Change: Globally, our open ablation franchise achieved 21% annual growth in 2023, showing a continued elevation over historical growth rates in this franchise.
As we begin 2024, we are confident in the increasing adoption of the encompass clamp the United States and look forward to the European launch later in the year and other markets in the future.
Speaker Change: Next turning to appendage management.
Speaker Change: <unk> products for left atrial appendage closure in both open heart and minimally invasive invasive procedures.
Speaker Change: A foundation of our business.
Speaker Change: In many markets around the world <unk> devices are leading our growth as left atrial appendage management becomes the standard of care in cardiac surgery.
Speaker Change: We are excited to have seen the Sts.
Michael H. Carrel: We are excited to have seen the SDS, AHA, and ACC all elevate surgical LA exclusion to class 1A within their guidelines recently, and we expect this evolution in guidelines to propel strong continued growth for our business. Overall, our panda management business grew 21% in 2023, and we closed out the year with an acceleration in quarterly growth at 24% for the fourth quarter. Our growth was driven primarily by sales of Atriclip Flex-V, Pro2, and Pro-V devices, reflecting strong attachment to both open and minimally invasive procedures and is indicative of the immense opportunity that is still ahead. To that end, we celebrated a milestone in 2023 with more than half a million AtriClip devices sold to date. This milestone stands on AtriCure's longstanding commitment and decades of innovation and research, which we are continuing in 2024 and beyond.
Speaker Change: Jay and ACC.
Speaker Change: All elevate surgical exclusion.
Speaker Change: Exclusion to class one eight within their guidelines recently and we expect this evolution and guidelines to propel strong continued growth for our business.
Speaker Change: Overall, our appendage management business grew 21% in 2023, and we closed out the year with an acceleration in quarterly growth at 24% for the fourth quarter.
Speaker Change: Our growth was driven primarily by sales of <unk> Flex V Pro two and pro V devices, reflecting strong attachment to both open and minimally invasive procedures.
Speaker Change: And is indicative of the immense opportunity that is still ahead.
Speaker Change: To that end, we celebrated a milestone in 2023 with more than a half a million <unk> devices sold to date.
Speaker Change: This milestone stands on <unk> long standing commitment and decades of innovation and research.
Speaker Change: Which we are continuing in 2024 and beyond.
Michael H. Carrel: In late 2023, we submitted a 510k clearance notification to the FDA for our next generation Atriclip device, the Flex Mini, which builds off our proven technology to increase ease of use and significantly decrease the size of our Atriclip device, which already has the smallest profile on the market. We anticipate clearance in late 2024, with the U.S. launch following quickly thereafter.
Speaker Change: In late 2023, we submitted a 510 clearance notification to the FDA for our next generation <unk> device, the flex, many which builds off our proven technology to increase ease of use and significantly decrease the size of our <unk> device, which already has the smallest profile on the market.
Speaker Change: We anticipate clearance in late 2024 with the U S launch following quickly thereafter.
Michael H. Carrel: Additionally... To extend our potential patient impact, we are actively investigating the application of atrial group devices in patients with preoperative AFib diagnosis through our LEAPS clinical trial. The LEAPS trial seeks to demonstrate a clinically meaningful reduction in ischemic and systemic atrial or arterial embolism, differentiating our atriocle product from all other appendage management options in cardiac surgery and expanding our addressable markets globally. Enrollment in LEAPS began in late January 2023 and accelerated throughout the year.
Speaker Change: Additionally.
Speaker Change: To extend our potential patient impact we're actively investigating the application of <unk> devices and patients with preoperative Afib diagnosis.
Speaker Change: Our Leafs clinical trial.
Speaker Change: The leaf trial seeks to demonstrate a clinically meaningful reduction in ischemic and systemic atrial arterial embolism differentiating our <unk> product from all other appendage management options in cardiac surgery, and expanding our addressable markets globally.
Speaker Change: Enrollment began in late January 2023, and accelerated throughout the year.
Michael H. Carrel: We ended 2023 far ahead of our internal expectations, and as of today, we have enrolled over 1,700 patients in the study. We are expanding clinical trial sites in 2024 and expect first enrollment from centers in Europe in the coming weeks. However, the trial will take several years to complete.
Speaker Change: We ended 2023 far ahead of our internal expectations and as of today, we have enrolled over 700 patients in the study.
Speaker Change: We are expanding clinical trial sites in 2024, and expect first enrollment from centers in Europe in the coming weeks.
Speaker Change: While the trial will take several years to complete.
Michael H. Carrel: The pace of enrollment both validates our decision to embark on this trial and underscores the excitement from clinicians and patients. Moving now to our pain management franchise, where a cryosphere probe provides temporary relief for post-operative pain. Since the launch in 2019, the Cryosphere device has exhibited remarkable growth, with full year 2023 revenue exceeding $50 million worldwide, reflecting growth of 26% year-over-year. The base of accounts we serve has expanded just as rapidly, and we saw more than 750 accounts purchasing globally in 2023. That said, to capitalize on the full market potential, we have several parallel efforts underway to add growth drivers for this business. First, our next-generation technology, the Cryosphere Plus probe, was cleared by the FDA in the fourth quarter. The CryoSphere Plus device will enable faster ablations, improving the efficiency of procedures.
Speaker Change: The pace of enrollment both validates our decision to embark on this trial and underscores the excitement from clinicians and patients.
Speaker Change: Moving now to our pain management franchise, where a prowler pro provides temporary relief for post operative pain.
Speaker Change: Since the launch in 2019, the crossover device has exhibited remarkable growth with full year 2023 revenue exceeding $50 million worldwide, reflecting growth of 26% year over year.
Speaker Change: The base of accounts, we serve has expanded just as rapidly and we saw more than 750 accounts purchasing globally in 2023.
That said to capitalize on the full market potential we have several parallel efforts underway to add growth drivers for this business.
Speaker Change: First our next generation technology, the cryo sphere, plus probe was cleared by the FDA in the fourth quarter.
Speaker Change: The cryo sphere, plus device will enable faster ablation improving efficiency of procedures.
Michael H. Carrel: Recently, we completed the first procedures with this device with a 25% reduction in ablation time. We expect to move to full launch in the second quarter. We are also conducting economic studies and partnering with multiple centers to expand clinical data to better illustrate the value proposition of crown-nerve block therapy. We will continue to invest in commercial resources worldwide to promote awareness of this important alternative to traditional pain management practices. Lastly, while we focus on driving adoption in thoracic and sternotomy procedures, we are carefully evaluating potential new applications and market opportunities for cryo-nerve block therapy and look forward to updating you on progress.
Speaker Change: Recently, we completed the first procedures with this device with a 25% reduction in ablation time, we.
Speaker Change: We expect to move to full launch in the second quarter.
We are also conducting economic studies and partnering with multiple centers to expand clinical data to better illustrate the value proposition of crowd nerve block therapy.
Speaker Change: We will continue to invest in commercial resources worldwide to promote awareness for this important alternative to traditional pain management practices.
Speaker Change: Lastly, while we focus on driving adoption and thoracic and Sternotomy procedures, we are carefully evaluating potential new applications and market opportunities for crowd nerve block therapy and look forward to updating you on progress.
Michael H. Carrel: Finally... Rounding out our portfolio is hybrid AF therapy, focusing on standalone treatment of the millions of patients with longstanding persistent AFib. We ended 2023 on a high note, with 27% year-over-year franchise growth in the fourth quarter. As I've said on several calls over the past year, 2023 was a building year for hybrid AF therapy to ensure a strong foundation for lasting success throughout our accounts and leading to accelerating growth in the future. We are thoughtful about partnering with our customers to address workflow challenges and comprehensively understand their needs for program expansion. Our fourth-quarter results confirmed that our work throughout 2023 is having an impact, and we will continue our efforts into 2024. We expect 2024 to be an exciting year for standalone treatment of AFib, as peers introduce PFA catheter technology in the U.S. market.
Speaker Change: Finally.
Speaker Change: Rounding out our portfolio is hybrid <unk> therapy.
Speaker Change: Focusing on Standalone treatment of the millions of patients with long standing persistent afib.
Speaker Change: We ended 2023 on a high note with 27% year over year franchise growth in the fourth quarter.
Speaker Change: As I've said on several calls over the past year 2023 was a building year for hybrid <unk> therapy to ensure a strong foundation for lasting success throughout our accounts and leading to accelerating growth in the future we.
Speaker Change: We were thoughtful about partnering with our customers to address workflow challenges and comprehensively understand their needs for program expansion.
Speaker Change: Our fourth quarter results confirmed that our work throughout 2023 is having an impact and we will continue our efforts into 2024.
Speaker Change: We expect 2024 to be an exciting year for standalone treatment of Afib.
Speaker Change: <unk> introduced PFA catheter technology in the U S market.
Michael H. Carrel: The focus on more efficient endocardial ablation driven by PFA should provide a tailwind for everyone in the AFib market. Our hybrid approach remains complementary to PFA, just as it is complementary to other energy sources used in endocardial procedures. Further, AF therapy remains the only proven solution for long-term hybrid AF therapy remains the only proven solution for longstanding, persistent AFib patients. In addition to our converged trial results, there is a rapidly growing body of clinical evidence from independent studies and registries showing catheter ablation alone is not an effective treatment for patients with advanced AFib.
Speaker Change: The focus on more efficient endocardial ablation, driven by PFA should provide a tailwind for everyone in the afib market.
Speaker Change: Our hybrid approach remains complimentary to PSA just as it is complementary to other energy sources used an endocardial procedures.
Speaker Change: Further <unk> therapy remains the only <unk>.
Speaker Change: Proven solution for launched hybrid <unk> therapy remains the only proven solution for long standing persistent afib patients.
Speaker Change: In addition to our converge trial results. There is a rapidly growing body of clinical evidence from independent studies and registries showing catheter ablation alone is not an effective treatment for patients with advanced Afib.
Michael H. Carrel: In 2023, data from our CEASE-AF study and DEEP-AF clinical trial provided even more support for a hybrid approach. Moreover, recent updates to clinical guidelines published by AHA and ACC demonstrate the importance of hybrid AF therapy. As such, we will continue to build our program development efforts with the goal of cementing efficient, scalable workflows for a broader base of customers. We have a strong conviction in the accelerating adoption of our hybrid AF therapy for the millions of patients suffering from longstanding persistent atrial fibrillation. In summary, 2023 was another truly exceptional year for AtriCure, defined by major milestones in patient impact and accelerating top and bottom line growth. We are excited to carry this momentum into 2024 as we advance adoption of our therapies and invest in future growth prospects that will propel AtriCure forward for many years to come. And with that, I will turn the call over to Angie Weirich, our Chief Financial Officer. Angie
Speaker Change: In 2023 data from our cease AF study and deep AF clinical trial provided even more support for a hybrid approach.
Speaker Change: Moreover, recent updates to clinical guidelines published by AJ and ACC demonstrate the importance of hybrid <unk> therapy.
Speaker Change: As such we will continue to build our program development efforts with the goal of cementing efficient scalable workflows for a broader base of customers.
Speaker Change: We have a strong conviction and the accelerating adoption of our hybrid <unk> therapy for the millions of patients suffering from long standing persistent atrial fibrillation.
Speaker Change: In summary, 2023 was another truly exceptional year for <unk> defined by major milestones and patient impact and accelerating top and bottom line growth.
We are excited to carry this momentum into 2024, as we advance adoption of our therapies and invest in future growth prospects that will propel <unk> forward for many years to come and with that I will turn the call over to Andrew <unk>, Our Chief Financial Officer, Andrew Thank.
Angie Weirich: Thank you, Mike. Our fourth quarter 2023 worldwide revenue of $106.5 million increased 21% on a reported basis and 20.5% on a constant currency basis when compared to the fourth quarter of 2022. U.S. revenue was $88.8 million, a 20.1% increase from the fourth quarter of 2022, reflecting robust activity across each franchise, highlighted by an uptick in adoption of our hybrid AF therapy, representing 30.6% growth for the quarter, along with continued strength from key appendage management, open ablation, and pain management products. International revenue totaled $17.8 million, up 25.8% on a reported basis and up 22.1% on a constant currency basis as compared to the fourth quarter of 2022.
Andrew: Thank you Mike.
Our fourth quarter 2023 worldwide revenue of $106 $5 million increased 21% on a reported basis and 25% on a constant currency basis, when compared to the fourth quarter of 2022.
Andrew: <unk> revenue was $88 8, million% to 21% increase from the fourth quarter of 2022, reflecting robust activity across each franchise highlighted by an uptick in adoption of our hybrid <unk> therapy, representing 36% growth for the quarter along with continued strength from key appendage managed.
Andrew: <unk> opened ablation and pain management products.
Andrew: International revenue totaled $17 $8 million up 25, 8% on a reported basis and up 22, 1% on a constant currency basis as compared to the fourth quarter of 2022.
Angie Weirich: We continue to see strong demand for our differentiated solutions in major international markets with significant growth in appendage management and pain management, sequentially worldwide sales of $8.3 million or 8.4% over Q3 2023. Gross margin for the fourth quarter 2023 was 74.9%, up 94 basis points from the fourth quarter of 2022. The increase was driven primarily by favorable production efficiencies, partially offset by less favorable geographic and product mix.
Andrew: We continue to see strong demand for our differentiated solutions in major international markets with significant growth in appendage management and pain management.
Andrew: <unk> worldwide sales grew $8 3 million or eight 4% over Q3 2023.
Andrew: Gross margin for the fourth quarter 2023 was 74, 9% up 94 basis points from fourth quarter of 2022.
Andrew: The increase was driven primarily by favorable production efficiencies, partially offset by less favorable geographic and product mix.
Andrew: Fourth quarter, 2023 research and development expenses increased $7 million or 51% and SG&A expenses increased $12 2 million or 22% over the fourth quarter 2022.
Angie Weirich: Fourth quarter 2023 research and development expenses increased $7 million, or 51%, and SDNA expenses increased $12.2 million, or 22% over the fourth quarter 2022. Turning to the bottom line, we drove positive adjusted EBITDA of $4.8 million for the fourth quarter 2023 compared to positive adjusted EBITDA of $6 million for the fourth quarter 2022. While we are continuing to drive improvement in gross margin and realizing operating leverage in our commercial and administrative infrastructure, we experienced a significant increase in research and development costs in the fourth quarter of 2023 due to the rapid enrollment and expansion of our LEAPs clinical trial and multiple product development initiatives underway. Our loss per share and adjusted loss per share was $0.21 for the fourth quarter 2023 compared to a loss per share and adjusted loss per share of $0.09 for the fourth quarter 20 U.S. sales increased 20.3% to $333.5 million, and international sales increased 23.5% or 22.1% on a constant currency basis. $65.7 million.
Andrew: Turning to the bottom line, we drove positive adjusted EBITDA of $4 8 million for the fourth quarter 2023, compared to positive adjusted EBITDA of $6 million for the fourth quarter 2022.
Andrew: While we are continuing to drive improvement to gross margin and realizing operating leverage in our commercial and administrative infrastructure, we experienced a significant increase in research and development costs in the fourth quarter of 2023 due to the rapid enrollment and expansion of our leaps clinical trial and multiple product development initiatives underway.
Andrew: Our loss per share and adjusted loss per share was <unk> 21 for the fourth quarter 2023, compared to a loss per share and adjusted loss per share of <unk> for the fourth quarter 2022.
Andrew: Now to review full year 2023 result.
Andrew: Worldwide revenue was $399 $2 million, an increase of 28% on a reported basis and 26% on a constant currency basis.
Andrew: U S sales increased 23% to $333 5 million and international sales increased 23, 5% or 22, 1% on a constant currency basis to $65 7 million.
Andrew: The continued expansion of the encompass clamp drove U S. Open ablation sales to $105 3 million or 22, 3% growth over 2022.
Andrew: In 2023, our U S pain management franchise grew 23, 1% to $49 $2 million from increasing activity in existing accounts, along with the new account adoption.
Andrew: U S. Mis revenue was $44 $6 million, reflecting single digit growth in our legacy device sales bolstered by approximately 18% growth in <unk> sales, where we are successfully laying the groundwork for long term growth.
Angie Weirich: The continued expansion of the ENCOMPASS clamp drove U.S. open ablation sales to $105.3 million, or 22.3% growth over 2022. In 2023, our U.S. pain management franchise grew 23.1% to $49.2 million from increasing activity in existing accounts along with new account adoption. USMIS revenue was $44.6 million, reflecting single-digit growth in our legacy device sales, bolstered by approximately 18% growth in EpiSense sales, where we are successfully laying the groundwork for long-term growth.
2023 U S. Appendage management sales reached $134 5 million, a 19, 5% increase over 2022, driven largely by our <unk> Flex V device.
Andrew: And much like U S trends and activity in 2023, our international revenue growth was propelled by appendage management open ablation and pain management products.
Andrew: Gross margin for the year ended at 75, 2% an increase of 79 basis points from 2022 similar to our fourth quarter results. The increase in gross margin reflects production efficiencies realized throughout the year, partially offset by less favorable geographic and product mix.
Angie Weirich: 2023 U.S. appendage management sales reached $134.5 million, a 19.5% increase over 2022, driven largely by our Atriclip FlexFee device. And much like US transit activity in 2023, our international revenue growth was propelled by appendage management, open ablation, and pain management products. Gross margin for the year ended at 75.2%, an increase of 79 basis points from 2022.
Moving to operating expenses full year 2023, operating expenses increased 13, 3% to $327 $1 million from $288 6 million in 2022.
Andrew: Research and development costs expanded by $16 $6 million or 28, 9% on both clinical trial and product development project spend as we extend our pipeline with clinical evidence and innovation.
Andrew: SG&A expenses increased $21 9 million or nine 5% with leveraging our training and education programs commercial team and infrastructure driving down operating expenses as a portion of revenue.
Angie Weirich: Similar to our fourth quarter results, the increase in gross margin reflects production efficiencies realized throughout the year, partially offset by a less favorable geographic and product mix. Moving to operating expenses, full year 2023 operating expenses increased 13.3% to $327.1 million from $288.6 million in 2022. Research and development costs expanded by $16.6 million, or 28.9% on both clinical trial and product development project spend as we extend our pipeline with clinical evidence and innovation. SD&A expenses increased $21.9 million, or 9.5%, with leverage in our training and education programs, commercial team, and infrastructure driving down operating expenses as a portion of revenue, in addition to a one-time benefit in 2023 from a legal settlement. We remain focused on continued efficiencies in SGMA while maintaining investments in R&D for future expansion. Full year 2023 adjusted EBITDA was positive $19.4 million dollars compared to a negative $2.2 million dollars in 2022, an improvement of $21.6 million dollars. Our loss per share was $0.66 in 2023 compared to a loss per share of $1.02 in 2022. Adjusted loss per share was $0.75 and $1.02, respectively.
Andrew: In addition to a one time benefit in 2023 from legal settlements.
We remain focused on continued efficiencies in SG&A, while maintaining investments in R&D for future expansion.
Andrew: Full year 2023, adjusted EBITDA was positive $19 4 million compared to a negative $2 2 million in 2022, an improvement of $21 6 million.
Andrew: Our loss per share was <unk> 66 in 2023 compared to a loss per share of $1 <unk> in 2022.
Andrew: Adjusted loss per share was <unk>, 75, and $1 <unk> respectively.
Andrew: We ended 2023 with $137 $3 million of cash and investments a robust working capital position and the flexibility to fund future opportunities and investments.
Andrew: Finally, turning to our outlook for 2024 consistent with our guidance in early January we expect to achieve between 459 and $466 million in revenue for the year, reflecting growth of 15% to 17% over full year 2023 results.
Andrew: Embedded in our guidance is the assumption that product innovation and supporting clinical data will propel us to 15% growth and beyond.
Andrew: Also included in our guidance or market dynamics that include increasing competition.
Andrew: As we look at our progress with market development and the opportunities of each franchise, we expect our franchise growth rates in the United States to align closely with our expectations of 15% to 17% annual growth.
Andrew: We continue to see growth in our pain management business through deepening used in thoracic procedures and the addition of clinical data to lead to even wider acceptance of this therapy.
Angie Weirich: We ended 2023 with $137.3 million of cash and investments, a robust working capital position, and the flexibility to fund future opportunities and investments. Finally, turning to our outlook for 2024. Consistent with our guidance in early January, we expect to achieve between $459 and $466 million in revenue for the year, reflecting growth of 15 to 17 percent over full year 2023 results. Embedded in our guidance is the assumption that product innovation and supporting clinical data will propel us to 15% growth and beyond. Also included in our guidance are market dynamics that include increasing competition. As we look at our progress with market development and the opportunities of each franchise, we expect our franchise growth rates in the United States to align closely with our expectations of 15 to 17% annual growth.
Andrew: We believe the exceptional adoption of our encompass clamp will continue to drive performance in open ablation, while broader progress with hybrid <unk> therapy, using our <unk> system to lift mis ablation growth in 2024.
Andrew: Complementing these drivers is our <unk> products, which we can which we see continuing delivery of steady growth over the large base of revenue.
Andrew: Additionally, we anticipate our international growth to remain on pace with the United States in 2024 and beyond.
Andrew: In terms of revenue cadence for the year, we expect typical seasonality to inform 2024 with first quarter revenue likely to be flat to our fourth quarter of 2023.
Andrew: From a margin perspective, we expect 2020 for gross margin to be in line with our 2023 result with potential for modest improvement from cost savings initiatives later this year.
Andrew: We anticipate headwinds from product and geographic mix as well as increasing material costs to be offset by continued production efficiencies and leveraging scale within our operations as we grow.
And as we have said before our primary focus with capital allocation is to incubate. The next set of growth drivers for <unk>.
Angie Weirich: We continue to see growth in our pain management business through deepening use in thoracic procedures and the addition of clinical data to lead to even wider acceptance of this therapy. We believe the exceptional adoption of our Encompass clamp will continue to drive performance in open ablation while broader progress with hybrid AF therapy using our EpiCent system will lift MIS ablation growth in 2024. Complimenting these drivers is our AtriClip products, which we can see continuing delivery of steady growth over a large base of revenue. Additionally, we anticipate our international growth to remain on pace with the United States in 2024 and beyond.
Therefore, we expect to maintain R&D as a percentage of revenue at roughly 19% to 20% in 2024.
Andrew: Our spending across SG&A will continue to moderate in proportion to revenue, providing leverage and sustained improvement to profitability.
With these priorities in mind, we expect full year 2024, adjusted EBITDA to range from 26% to $29 million translating.
Andrew: Translating to an adjusted loss per share of approximately <unk> 74 to <unk> 82.
Andrew: We also anticipate a moderate cash burn in 2024 against our strong cash balance and capital position.
Andrew: And as a reminder, our first quarter expense profile is typically highest variable compensation payouts share vesting and other operational needs will drive a higher overall cash burn and modest modest bottom line results.
Angie Weirich: In terms of revenue cadence for the year, we expect typical seasonality to inform 2024, with first quarter revenue likely to be flat to our fourth quarter of 2023. From a margin perspective, we expect 2024 gross margin to be in line with our 2023 results, with potential for modest improvement from cost savings initiatives later this year. We anticipate headwinds from product and geographic mix, as well as increasing material costs to be offset by continued production efficiencies and leveraging scale within our operations as we grow. And, as we have said before, our primary focus with capital allocation is to incubate the next set of growth drivers for AtriCure. Therefore, we expect to maintain R&D as a percentage of revenue at roughly 19 to 20% in 2024. Our spending across SG&A will continue to moderate in proportion to revenue, providing leverage and sustained improvement to profitability. With these priorities in mind, we expect full-year 2024 adjusted EBITDA to range from $26 to $29 million, translating to an adjusted loss per share of approximately 74 cents to 82 cents.
As I turn the call back to Mike for closing comments I would like to reiterate 2023 was a stellar year at <unk> care from expanding patient impact and revenue growth to realizing positive adjusted EBITDA our results stem from the powerful collaboration of my <unk> teammates.
Andrew: We enter 2024 with an unrelenting dedication to the patients we serve and drive to continue our financial progress Mike. Thank.
Mike: Thank you Angie I would like to close by congratulating our entire team on an incredible 2023.
Speaker Change: Patient outcomes are our garden, our guiding principle and we are most proud of that at <unk>.
Speaker Change: Your teamwork led to over 100000 patients treated this year and over $1 million in our company's history.
Speaker Change: We are making a difference for patients with advanced forms of Afib.
Speaker Change: Higher risk of stroke and pain after surgery.
Speaker Change: As we grow and evolve in the future patient outcomes, we will continue to drive our efforts as we capitalize on our leadership in these markets and with that I'll turn it over to the operator for questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one or your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: We ask that callers please limit questions to one and one follow up at a time and then re queue for any additional questions.
Speaker Change: Please standby, while we compile the Q&A roster.
Our first question comes from the line of Robbie Marcus with Jpmorgan. Your line is now open.
Angie Weirich: We also anticipate a moderate cash burn in 2024 against our strong cash balance and capital position. And as a reminder, our first quarter expense profile is typically highest. Variable compensation payouts, share vesting, and other operational needs will drive a higher overall cash burn and modest bottom line results.
Robert Marcus: Oh, great. Thanks for taking my question and congrats on a good quarter.
Robert Marcus: I wanted to start on.
Robert Marcus: The click business and.
Robert Marcus: The minimally invasive had good fourth quarters beat expectations.
Robert Marcus: Just.
Angie Weirich: As I turn the call back to Mike for closing comments, I would like to reiterate that 2023 was a stellar year at AtriCure. From expanding patient impact and revenue growth to realizing positive adjusted EBITDA, our results stem from the powerful collaboration of my AtriCure teammates. We enter 2024 with an unrelenting dedication to the patients we serve and a drive to continue our financial progress. Thank you, Angie.
Robert Marcus: You kind of talked about it broadly, but maybe a little more specifically how youre thinking about those two relative to open in pain as we progress into 'twenty four.
Speaker Change: Yes, Robbie thanks for the comments I think as you heard in the scripted comments when we look at the guidance for the year. Our expectation is that in the U S. The growth rates of each franchise are pretty tightly coupled around the corporate average I think unlike what we were saying in 2023 based on kind of our expectations of the.
Michael H. Carrel: I would like to close by congratulating our entire team on an incredible 2023. Patient outcomes are our guiding principle, and we are most proud of that at AtriCure. Your teamwork led to over 100,000 patients treated this year and over one million in our company's history. We are making a difference for patients with advanced forms of AFib, higher risk of stroke, and pain after surgery. As we grow and evolve in the future, patient outcomes will continue to drive our efforts as we capitalize on our leadership in these markets. Thank you. As a reminder, to ask a question, please press Star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker Change: A year of having some franchises as outperforming and some franchises kind of falling below the corporate growth rate given the progress within each franchise and kind of development opportunities would expect them to be more closely aligned around the corporate growth rate.
Speaker Change: Great and.
Robbie: I guess I have to ask just given all the investor angst around.
Robbie: Your competitor Medtronic launching in April Cliff.
Robbie: Competitor, what youre seeing so far in the field.
Robbie: In 2024, so far how the sales force is reacting to it and any feedback you have from physicians. Thanks a lot.
Speaker Change: I appreciate the second question there Ravi.
Ravi: Handle it from a couple of different angles I'd say first is just a reminder, we welcome competition. We think it's actually a really good thing and validates the market.
Operator: We ask that callers please limit questions to one and one follow-up at a time, and then re-cue for any additional questions. Please stand by while we compile the Q&A roster. Our first question comes from the line of Robby Marcus with J.P. Morgan. Your line is now open.
Ravi: And what I mean by that is that.
Ravi: There as we talked about we're still less than 5% penetrated the overall worldwide market. There are over 2 million patients that undergo cardiac surgery worldwide.
Ravi: Less than 5% or so actually have an <unk> or their appendage managed it today.
Ravi: We have really big opportunities in front of us as we continue to invest in innovation, we're talking about the flex many product coming out later on this year, which is our eighth generation of the <unk> triplet product. In addition to that we're.
Michael H. Carrel: Oh, great. Thanks for taking the question. Congratulations on a good quarter. Wanted to start on, The clip business and Minimally Invasive had good fourth quarters, beat expectations, just, you kind of talked about it broadly, but maybe a little more specifically how you're thinking about those two relative to open and pain as we progress. Yeah, Robbie, thanks for the comments.
Ravi: We're investing in clinical evidence with the leaps trial to show a stroke reduction for patients that are undergoing cardiac surgery.
Ravi: So we're making the necessary investments on those particular fronts, we are seeing medtronic and their clip out in the market.
Michael H. Carrel: I think, as you heard in the scripted comments, when we look at the guidance for the year, our expectation is that in the US, the growth rates of each franchise are pretty tightly coupled around the corporate average. I think, unlike what we were saying in 2023, based on our expectations for the year of having some franchises outperforming and some franchises kind of falling below the corporate growth rate, given the progress within each franchise and the kind of development opportunities, we would expect them to be more closely aligned around the corporate growth rate. Great And Also, I guess I have to ask, just given all the investor angst around..., your competitor Medtronic launching and your AtriClip competitor, what you're seeing so far in the field in 2024, how the sales force is reacting to it, and any feedback you have from physicians. Thanks a lot. I appreciate the second question there, Robbie. I'll handle it from a couple different angles.
Ravi: We think it's great that they are actually made that kind of investment we do see people trialing it out and using the product.
Ravi: But we also feel very confident that we have a superior product today in the market with our flex V product and we feel like with the innovation, we're coming out of the flex many others, we're really well positioned to manage competition that comes into the market. We don't think theyre going to be the first competitor in any of our franchises one of the things for <unk>.
Ravi: We are dedicated as I mentioned upfront to really establishing new standards of care in areas and putting investments in R&D on both the innovation side, some new products and continuing that in fact, we've got seven new products coming out over the next two years, combining that with exceptional clinical evidence to demonstrate why are.
Ravi: Products work incredibly well and then also putting efforts around our sales team and teams out in the field to specifically be the best in the world at understanding our products and understanding how they help patient care on that front and we think that we're really well positioned across all of our product lines on that and welcome to the.
Ravi: Competition and also welcomed the validation of the markets that we're in.
Speaker Change: I appreciate it thanks a lot.
Speaker Change: Thank you. Our next question comes from the line of Danielle <unk> with UBS. Your line is now open.
Danielle: Daniel Your line is open please check your mute button.
Michael H. Carrel: I'd say first, just a reminder that we welcome competition. We think it's actually a really good thing and validates the market. And what I mean by that is that, as we talked about, we're still less than 5% penetrated in the overall worldwide market. There are over 2 million patients that undergo cardiac surgery worldwide. Less than 5% or so actually have an Atriclip or their appendage managed today.
Danielle: Hi, everyone can you hear me this is Simon on for Danielle.
Simon: We can hear you weaken here seven.
Simon: Hey, guys. Thanks for taking the question. This is Simon again.
Simon: You are correct in segments really demonstrated great growth over the past several years.
Simon: Naturally moderated just given the scale.
Simon: Do you think mid teens growth in the segment is sustainable.
Simon: What are the puts and takes there really think about moving forward here.
Speaker Change: Yes, I appreciate the question.
Speaker Change: You stated it very well, it's obviously gotten to the size and scale of $50 million business that grew 26%. This year. We do think that those mid teen plus growth rates are absolutely sustainable not only in thoracic. So if you look at just the thoracic market were less than 20% penetrated today. So we have a long way to go and as I mentioned in my comments.
Michael H. Carrel: We have really big opportunities in front of us as we continue to invest in innovation. We're talking about the Flex Mini product coming out later this year, which is our eighth generation of the Atriclip product. In addition to that, we're investing in clinical evidence with the LEAPS trial to show a stroke reduction for patients that are undergoing cardiac surgery. So we're making the necessary investments on those particular fronts. We are seeing Medtronic and their clip out in the market, and we think it's great that they've actually made that kind of investment. We do see people trying it out and using the product, but we also feel very confident that we have a superior product today in the market with our Flex V product. And we feel like with the innovation we're coming out with the Flex Mini and others, we're really well positioned to manage competition that comes into the market. We don't think they're gonna be the first competitor in any of our franchises.
Speaker Change: We're investing in clinical evidence to demonstrate both the economic and clinical value around that to hopefully push those numbers up even more over the coming years, you top that off with us investing in much like I talked about about all of our product lines. We've got the crowd surplus that just came out this year, we've got a new product coming out later on this year that is an advancement on top of that.
Speaker Change: That are hopefully going to reduce the time that they need to actually do their ablation, which hopefully will also open up the sternotomy market a little more aggressively than it has but thats been a pushback in that market. So thoracotomy alone less than 20% penetrated we're coming out new products that reduce time that will hopefully enable and actually get us into the sternotomy market a little bit more aggressively as you're looking at.
Speaker Change: Future years and.
Speaker Change: So we feel like we're in a really good position relative to the growth there and the final thing I'll add is when we talked about or you heard in my comments as well there are other areas extremities in particular that could also benefit from.
Michael H. Carrel: One of the things for Atricure is that we are dedicated, as I mentioned upfront, to really establishing new standards of care in areas and investing in R&D on the innovation side, so new products and continuing that. In fact, we've got seven new products coming out over the next two years, combining that with exceptional clinical evidence to demonstrate why our products work incredibly well. And then also putting efforts into our sales team and teams out in the field to specifically be the best in the world at understanding our products and understanding how they help patient care on that front. And we think that we're really well positioned across all of our product lines on that and welcome the competition and also welcome the validation of the markets that we're in. I appreciate it. Thanks a lot.
Speaker Change: The cryo ablation that we use and we are in the process of actually looking at that are evaluating it and studying it we're not ready to announce anything yet but over the next couple of years I do believe it will be announcing getting into other areas outside of just thoracic and sternotomy, which have a lot of room for growth already so.
Speaker Change: That's a good that's a long way of answering yes, we feel comfortable with the kind of mid teens growth being in that range for a long time.
Speaker Change: That's really helpful. Thank you guys one quick one for you.
Speaker Change: You mentioned potentially launching a product in the ISP segment this year.
Speaker Change: That still on target.
Speaker Change: That would be incredibly helpful.
So a reminder for people because we didn't really go into detail on today's call. We're running a trial called <unk> for patients with inappropriate sinus tachycardia, what that represents our people that have elevated heart rates, while they're at while the resting typically above 90 consistently most of these patients are in the mid one hundreds and a 10.
Speaker Change: To affect women kind of in there, 20% to 40% or so.
Speaker Change: It's a very large patient population well over 1 million patients that actually represent this market. There were some an EP and a surgeon out of Belgium kind of invented a procedure in which you could leverage using our technology in combination with the mapping and the work done by the Electrophysiologist to basically reduce that and they showed almost.
Michael H. Carrel: Thank you. Our next question comes from the line of Danielle Antalffy with UBS. Your line is now open. Danielle, your line is open. Please check your mute button.
Operator: Hey everyone, can you hear me? This is Simon on for Danielle. We can hear you. We can hear you, Shepard. Hey guys, thanks for taking the question. This is Simon Nagan.
Speaker Change: A 100% improvement at both the six in one year six months and one year timeframe after the procedure.
Speaker Change: The existing products that we have worked incredibly well it's under investigation for this particular disease in the United States right now and we're making great progress on enrollment there Andy.
Michael H. Carrel: Your cryo segments really demonstrated great growth over the past several years, but it's naturally moderated just given the scale. Do you think mid-teens growth in this segment is sustainable, and what are the puts and takes to really think about moving forward here? Yeah, appreciate the question. You stated it very well.
Andy: And yes, we are developing a new product because right now our product today works incredibly well, but it takes a little while to actually get access to what you need to do there and so the new product is custom built very specifically for ISP and for this specific surgery and we do anticipate late this year early next year to kind of have that product in the market.
Speaker Change: Thanks, so much.
Speaker Change: Thank you. Our next question comes from the line of Bill <unk> with Canaccord. Your line is now open.
Michael H. Carrel: It's obviously gotten to the size and scale of a $50 million business that grew 26% this year. We do think that those mid-teen plus growth rates are absolutely sustainable, not only in the thoracic region. So if you look at just the thoracic market, we're less than 20% penetrated today. So we still have a long way to go. And as I mentioned in my comments, we're investing in clinical evidence to demonstrate both the economic and clinical value around that to hopefully push those numbers up even more over the coming years. You top that off with us investing, much as I talked about, in all of our product lines. We've got the cryosphere plus that just came out this year, and we've got a new product coming out later this year that is an advancement on top of that, that is hopefully going to reduce the time that they need to actually do their ablation, which hopefully will also open up the sternotomy market a little more aggressively than it has, because that's going to push back in that market.
Speaker Change: Hi, Mike and Andy It's John on for Bill Tonight, Thanks for taking our questions.
Speaker Change: And congrats on a strong Q4 two.
Speaker Change: Maybe just starting on a comp.
John: You said that about 50% of U S revenue from the clients now can you just talk about what hurdles still exist.
John: Meaning users shift that new device is this just contract timing or price sensitivity and you plan on eventually stop selling the older versions of the cramp.
Speaker Change: I'll start with the last we don't anticipate stopping selling any of our old clams, and they're actually exceptional we continue to do.
We get really good feedback on that they worked incredibly well that are really geared towards specific surgeons, who.
Speaker Change: Our doing the full Cox maze for the ones that we studied in our PMA for encompass quite.
Speaker Change: Quite frankly, it's just going to take time to educate people how to use the product to get people comfortable with that.
Michael H. Carrel: So thoracotomies alone, less than 20% penetrated, we're coming out with new products that reduce time that will hopefully enable and actually get us into the sternotomy market a little bit more aggressively as you look in future years. And so we feel like we're in a really good position relative to the growth there. And the final thing I'll add is, as we talked about, or you heard it in my comments as well, there are other areas, extremities in particular, that could also benefit from the cryoablation that we use. And we're in the process of actually looking at that, evaluating it, and studying it. We're not ready to announce anything yet, but over the next couple of years, I do believe that we'll be getting into other areas outside of just thoracic and sternotomy, which have a lot of room for growth already. That's a good way to do it.
Speaker Change: We're expanding into new sites were in about 55% to 60% of the sites in the U S. So we've got a lot of room for growth relative to that we're also planning to do a clinical trial as well very specifically a much like we did for the <unk>.
Speaker Change: <unk> trial, which was what got us the PMA approval for.
Speaker Change: Our original plans that we will anticipate doing that we think that without additional clinical evidence that could also have an impact on adoption over time.
Speaker Change: This isn't one of those ones that it's just going to grow overnight, but it's it's accelerated our growth rate. If you would've asked I think anybody if our open business could grow kind of above the low double digits kind of the 910, 11% that we are growing for many many years.
Speaker Change: This combined with reimbursement changes that have happened over the last couple of years of really accelerated adoption and more oblations that have happened. So I think I feel really good about the progress is much better than we ever expected.
Speaker Change: We will continue to kind of talk about it out in the field from that standpoint.
Michael H. Carrel: That's a long way of answering. Yes, we feel comfortable with the kind of mid-teens growth being in that range for a long time. That's really helpful. Thank you guys.
Speaker Change: Great. Thanks, Mike and then just on pain management Q2 kind of circle back to some of the other comments how.
Michael H. Carrel: You mentioned potentially launching a product in the ISP segment this year. Is that still on target? And any details on that would be incredibly helpful.
Speaker Change: How should we think about the timing of the economic outcome data that you've mentioned should is that going to move the needle to needle in 2024 and beyond and are you still considering gathering data to support an opioid reduction label. Thanks.
Michael H. Carrel: Yeah, so a reminder for people, because we didn't really go into detail on today's call, we're running a trial called HEAL-IST for patients with inappropriate sinus tachycardia. What that means is people that have elevated heart rates while they're resting, typically above 90. Consistently, most of these patients are in their mid-100s, and it tends to affect women kind of in their 20s to 40s or so.
Mike: Yes, I don't know that I would say that it's going to be a 2024 events relative to that data, it's going to be a cumulative aspect of the data for cryo nerve block and not one definitive trial, we're actually supporting many.
Mike: Trials that are multicenter across the country and over in Europe. The purpose of that is the totality of all of that evidence. We think is what's going to actually change practice, that's going to take several years to kind of do it but I think more and more papers are coming out every year. We had 14 trials that we're supporting or so last year that number is going to continue into this year.
Michael H. Carrel: It's a very large patient population, well over a million patients that actually represent this market. There were some, an EP and a surgeon out of Belgium kind of invented a procedure that you could leverage using our technology in combination with the mapping and the work done by the electrophysiologist to basically reduce that. And they showed almost 100% improvement at both a 6-month and 1-year timeframe after the procedure. The existing products that we have work incredibly well. It's under investigation for this particular disease in the United States right now, and we're making great progress on enrollment there. And yes, we are developing a new product because right now our product today works incredibly well, but it takes a little while to actually get access to what you need to do there. And so the new product is custom built very specifically for IST and for this specific surgery, and we do anticipate late this year or early next year to kind of have that product on the market. Thanks so much.
Mike: Many of those are looking at opioid reduction as part of.
Mike: What they're looking at overall is the outcome and so I do believe that that is something that's very important for people to track and to know and I think more and more papers are going to be written about the fact that people that do use this product tend to have a.
Mike: Lower use of opioids once they leave the hospital.
Mike: Yes.
Speaker Change: Great. Thanks again.
Speaker Change: Thank you. Our next question comes from the line of Matthew O'brien with Piper Sandler. Your line is now open.
Matthew O'brien: Afternoon. Thanks for taking my question. So I don't know if this is for micro <unk> EBIT, but I think Andy you mentioned that you're factoring in some competitive pressure here in 'twenty four into your guide you've grown 20% the last two years on the topline.
Michael H. Carrel: Thank you. Our next question comes from the line of Bill Plovonic with Kennecord. Your line is now open.
Matthew O'brien: Adding 60% at the midpoint, so about 400 basis points.
Michael H. Carrel: Hi Mike and Angie, it's Sean on for Bill tonight. Thanks for taking our questions. And congrats on a strong Q4, too. Maybe just starting on Encompass, you know, you said that about 50% of U.S. revenues are from the clamp now. Can you talk about what hurdles still exist, the remaining users, the shifts, the new device? Is this just contract timing or price sensitivity?
Matthew O'brien: It's around $16 million.
Matthew O'brien: I think of potential competition, you're factoring into runoff with law of large numbers or whatever it may be.
Matthew O'brien: Is that the right way to characterize the amount of pressure that youre anticipating is it only in the business and then if I do the math on it it would seem like youre kind of incorporating in around 10%, maybe a little bit north of that share loss is that the right way to characterize it.
Michael H. Carrel: And do you plan on eventually stopping selling the older versions of the clamp? Thanks. I'll start with the last. We don't anticipate stopping selling any of our old clams. They're actually exceptional.
Speaker Change: Yes, Matt I think you know based on years here that we start the year and we want to make sure that we're putting out a guy that we feel really good about executing against that gives us positions us well to kind of beat and raise as we go throughout the year.
Michael H. Carrel: We continue to get really good feedback on that. They work incredibly well. They're really geared towards specific surgeons who are doing the full Cox maze. They're the ones that we studied under PMA. For Encompass, quite frankly, it's just going to take time to educate people how to use the product and get people comfortable with that. We're expanding into new sites. We're in about 55 to 60% of the sites in the U.S., so we've got a lot of room for growth relative to that. We're also planning to do a clinical trial as well, very specifically, much like we did for the Ablate trial, which was what got us the PMA approval for our original clams.
Speaker Change: The range does consider both the growth drivers in our business as well as the potential competition in our market, but I think to that point. We are working in markets that are very very underpenetrated and that we believe that there is still significant growth potential.
Speaker Change: Even with competitive pressure, so long winded way of saying it's not.
Speaker Change: 10 points of that.
Speaker Change: That kind of loss relative to Medtronic share more importantly, I think what informed our guide through 2024 is just the strength of our portfolio and the momentum that we're seeing as we exit 2023 and start our new year end 2024, but want to make sure that we guide to numbers that we can execute strongly against that's been our philosophy for years and continues to be easily.
Michael H. Carrel: We will anticipate doing that. We think that with that additional clinical evidence, it could also have an impact on adoption over time. This isn't one of those ones that is just going to grow overnight, but it's accelerated our growth rate. If you would have asked anybody if our open business could grow above the low double digits, the 9%, 10%, 11% that we were growing for many, many years, this combined with reimbursement changes that have happened over the last couple of years has really accelerated adoption and more ablations that have happened. I think I feel really good about the progress. It's much better than we ever expected. We'll continue to talk about it out in the field from that standpoint. Great, thanks, Mike.
Speaker Change: The new year.
Speaker Change: Okay, and just specifically I know theres a lot of traveling going on have you seen people flipping over to <unk> and using.
Speaker Change: Using it a lot more cases or are you still seeing a dynamic where.
Speaker Change: Maybe try let me just say you know what I don't like this for the most part I'm sure. There are some people that will flip it.
Speaker Change: What are you seeing specifically, there and Dave one more follow up.
Dave: I mean, we're definitely seeing people trial at <unk>.
Dave: Across the country, but we feel really good about the strength of our franchise out there, Matt and feel like people really love the age group. It set a very high bar in terms of how well. It works people understand that we have a tremendous amount of clinical evidence and data behind it.
Michael H. Carrel: And then just on pain management, too, to kind of circle back to some of the other comments, you know, how should we think about the timing of the economic outcome data that you've mentioned? Is that going to move the needle in 2024 or beyond? And are you still considering gathering data to support an opioid reduction label? Thanks.
Dave: On the closure in particular.
Dave: Exceptional closer an exceptional safety profile with that device and so we feel like we're in a great position, even though people are trying it at various different places throughout the country.
Matt: Got it Okay, and then on the open business it looks like it accelerated in Q4 on a two year stack basis, but it was a little bit softer than I might have thought on a on a quarter over quarter basis. So just curious what youre seeing there in terms of adoption.
Michael H. Carrel: Yeah, I don't know that I would say that it's going to be a 2024 event relative to that data. It's going to be a cumulative aspect of the data for Crown and Nerve Block and not one definitive trial. We're actually supporting many trials that are multi-center across the country and in Europe. The purpose of that is that the totality of all that evidence, we think, is what's going to change practice. That's going to take several years to kind of do it.
Matt: Expectations for growth there is still another mid teens I don't know if the guidelines can help a little bit.
Matt: As well and then just any thoughts on competition I know there is somebody thats filed to compete with you is that something that youre building in a little bit this year, something that potentially could impact that business as we head into 2020. Thanks.
Matt: As Andrew mentioned on the guidance pretty much all of our businesses, we think being around that 15% to 17%.
Michael H. Carrel: But I think more and more papers are coming out every year. We had 14 trials that we were supporting or so last year. That number is going to continue into this year, and many of those are looking at opioid reduction as part of what they're looking at overall as an outcome. And so I do believe that that is something that's very important for people to track and to know. And I think more and more papers are going to be written about the fact that people that do use this product tend to have a lower use of opioids once they leave the hospital. Great, thanks again.
Matt: Two a pun intended they're all converging around that particular area.
Matt: So we feel like obviously theres upside potential and every one of our businesses to your point Matt.
Matt: Seeing great growth, there I think that to be able to continue to grow in the kind of baseline numbers that we've got at that kind of rate in cardiac surgery. The way. We are we feel really good about it but we anticipate that being kind of in that 15% to 17% pretty much all of our franchises across that from that standpoint, and we're always looking at competition I mean, there's no nothing specific to comment on at this point.
Michael H. Carrel: Thank you. Our next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is now open. Good afternoon.
Speaker Change: If competition does come in I think that we will obviously address it but we feel really comfortable with the guidance that we've given and net as Angie mentioned, we try to take a really.
Operator: Thanks for taking that question. So I don't know if this is for Mike or Angie, but I think Angie mentioned that you're factoring in some competitive pressure here in 24 into your guide. You've grown 20% the last two years on the top line. You're guiding 16% of the midpoint, so about 400 basis points.
Speaker Change: Conservative look at at the beginning of year to ensure that we can make sure that we can meet and beat it throughout the year.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Marie Thibault with <unk>. Your line is now open.
Marie Thibault: Hey, Mike Hey, Angie you got Sam Hi, Brian Murray and thanks for taking the questions and congrats on a nice finish to the year.
Marie Thibault: Maybe I can start on converge and just looking at the U S business growing.
Angie Weirich: That's around $16 million of potential competition you're factoring in, or I don't know if it's large numbers, whatever it may be. Is that the right way to characterize the amount of pressure that you're anticipating? Is it only in the CLPP business? And then if I do the math on it, it would seem like you're kind of incorporating around 10 percent, maybe a little bit north of that share loss. Is that the right way to characterize it?
Marie Thibault: The mis business growing 16% sequentially, 30% year over year.
Speaker Change: It does sound like things are really starting to click there and I know you addressed some of it in your prepared remarks, but any more color you can give on on any specifics.
Speaker Change: Does that give you the confidence now to touch a little bit harder on new site activation this year.
Speaker Change: Yes, Sam I think the we feel really good about the activity in the fourth quarter. I think this is reflective of a year plus of our team in the field supported by many others in the business really trying to hone in on where.
Angie Weirich: Yeah, Matt, based on my years here, we start the year and we want to make sure that we're putting out a guide that we feel really good about executing against and gives us positions as well to kind of beat and raise as we go throughout the year. The range does consider both the growth drivers in our business as well as the potential competition in our market. But I think you know, to that point, we are working in markets that are very, very underpenetrated, and we believe that there's still significant growth potential, even with competitive pressure. So, long-winded way of saying it's not, you know, 10 points or, you know, that kind of loss relative to Medtronic's share.
Sam: We're programs had a really good interest in starting a converged program why they've not been able to accelerate and see the kind of growth that we would expect so we feel really good that the activities are paying off and that we're making a difference in the accounts that we're focusing in on I'd say longer term. When you think through 2024, we're looking for that to be more.
Sam: Broadly replicated throughout the base of accounts. So that we can continue these kinds of growth rates, but I would say the efforts in the field are really what we're seeing is starting to pay off and looking for that to have a broader impact in 2024.
Angie Weirich: More importantly, I think what informed our guide through 2024 is just the strength of our portfolio and the momentum that we're seeing as we exit 2023 and start a new year in 2024. But we want to make sure that we guide to numbers that we can execute strongly against. That's been our philosophy for years, and continues to be as we start the new year. And Angie, specifically, I know there's a lot of trialing going on. Have you seen people flipping over to Penditure and using it in a lot more cases, or are you still seeing a dynamic where they maybe trial it, and they just say, you know what? I don't like this for the most part. I'm sure there are some people that'll flip it.
Sam: And it really execute the second part of your question was new account activation. So we did see a couple of new account Activations in 2023, I would say the focus of our team at this point in time is on existing accounts I think as they operate throughout 2024, there's still a lot of interest from.
Some customers are still we're very underpenetrated in terms of the universe of accounts that could have converged procedures are converged programs.
Sam: R&R still training new accounts and I think the work that we're doing today to help existing accounts be more efficient and think about that on your programs. I think long term will help us initiate new accounts and have them scale quickly.
Angie Weirich: What are you seeing specifically there? And I do have one more follow-up question. I mean, we're definitely seeing people trial it across the country, but we feel really good about the strength of our franchise out there, Matt, and feel like people really love the AtriClip. It sets a very high bar in terms of how well it works. People understand that we have a tremendous amount of clinical evidence and data behind it, not just on the closure in particular, showing exceptional closure and an exceptional safety profile with that device. And so we feel like we're in a great position, even though people are trying it at various different places throughout the country. Got it, okay, and then on the open business, it looks like it accelerated in Q4 on a two-year stack basis, but it was a little bit softer than I might've thought on a quarter-of-a-quarter basis. So just curious what you're seeing there in terms of adoption and expectations for growth there. Is it still another mid-teens? I don't know if the guidelines can help a little bit as well, and then just any thoughts on competition?
Speaker Change: Really helpful. Andrew Thanks for the added color there.
Speaker Change: Maybe just flipping nature clip and maybe looking beyond maybe some of the competitive dynamics, but you also mentioned some guideline changes and I'm just wondering if that can be.
Speaker Change: An additional tailwind to the underlying market and adoption for <unk> for.
Speaker Change: And for the club business, Thanks for taking the questions.
Speaker Change: Yeah, absolutely, we think that the guidelines are pretty monumental for the entire space.
Speaker Change: Basically, saying a class one recommendation.
Speaker Change: You should treat this appendage every single time somebody has atrial fibrillation today.
Speaker Change: And that is not just the cardiac surgeons doing it but at ACC in IHA to the referring cardiology community is basically sending everybody needs to treat the appendage when they're undergoing cardiac surgery and so absolutely we think thats a really good sign for this market overall, and obviously <unk> is being used to manage the appendage by many people around the globe. So.
Speaker Change: Its a great validation just like competition is great validation of the space and what we're doing there and then obviously, we're expanding that market with Leafs. So that eventually the data we get with that changes the guidelines for every patient not just those that have afib. That's our goal with that that's why we're investigating it.
Michael H. Carrel: I know there's somebody that's filed to compete with you. Is that something that you're building in a little bit this year or something that potentially could impact that business as we go? As Angie mentioned in the guidance, pretty much all of our businesses are, we think, around that 15 to 17%. I mean, pun intended, they're all converging around that particular area.
Speaker Change: And you can see the excitement with 1700 patients already enrolled out of a 6500.
Speaker Change: Person trial, it's pretty remarkable to see that kind of growth thats, the excitement people have and the belief and managing the appendage.
Michael H. Carrel: And so we feel like, obviously, there's upside potential in every one of our businesses. To your point, Matt, we're seeing great growth there. I think that to be able to continue to grow on the kind of baseline numbers that we've got at that kind of rate in cardiac surgery, the way we are, we feel really good about it. But we anticipate that being kind of in that 15 to 17%, pretty much all of our franchises across that from that standpoint. And we're always looking at competition. I mean, there's nothing specific to comment on at this point.
Speaker Change: So thanks again for taking the questions.
Speaker Change: Thank you. Our next question comes from the line of Joseph <unk> with Needham. Your line is now open.
Joseph: Hi, Mike Hi, Angie.
Joseph: Joseph.
Joseph: On for Mike.
Joseph: I guess, maybe just touching on <unk>.
Joseph: Gross margin improvement in the quarter I think Andrew you called out some production efficiencies.
Joseph: Looking into 2024.
Joseph: I think in the comments you guys talked about just being in line for 2024 potential modest improvement.
Joseph: I was just wondering if you could maybe give some more color around what happened in this quarter and some of those cost saving initiatives that you expect to rollout.
Michael H. Carrel: And if competition does come in, I think that we will obviously address it, but we feel really comfortable with the guidance that we've given. And, as Angie mentioned, we try to take a really conservative look at it at the beginning of the year to ensure that we can make sure that we can meet and beat it throughout the year. Thank you. Our next question comes from the line of Marie Thibault with BTIG. Your line is now open. Hey Mike. Hey, Angie. You've got Sam Iveron from Marie.
Joseph: This year, how you expect that to be phased.
Speaker Change: Yes, so what you saw in the fourth quarter really strong I'd say production efficiencies offsetting we had quite a few headwinds coming from the mix of our international business.
Speaker Change: That led to an improvement off of 2000 22020 to the fourth quarter comp and as we enter into 2024, I'd say kind of more of the same youre going to see nice improvements if the only thing that we saw was improvements too and our production efficiencies with the same kind of mix of revenue you'd see some nice improvements in 2024, but we.
Michael H. Carrel: Thanks for taking the questions and congrats on a nice finish to the year. Maybe I can start on Converge and just look at the U.S. business growing for the MIS business growing 16% sequentially, and 30% year-over-year. It does sound like, you know, things are really starting to click there, and I know you addressed some of that in your prepared remarks, but any more color you can give on any specifics, and maybe, you know, does that give you the confidence now to push a little bit harder on news site activation this year? Yeah, Sam, I think we feel really good about the activity in the fourth quarter.
Speaker Change: We're expecting some headwinds given the mix.
Speaker Change: Anticipation in 2024.
Speaker Change: <unk> talked about in the past a couple of areas, where we expect to see some improvements to margin. The first would be with the launch of the cryo sphere, plus probe to the extent that the adoption of that probe takes off in comparison, our replaces our existing cryo sphere probe. There is a nice benefit to our gross margin again, our launches anticipated in the second quarter. So you would see.
Angie Weirich: I think this is reflective of, you know, a year plus of our team in the field, supported by many others in the business, really trying to hone in on where programs had a really good interest in starting a Converge program, and why they've not been able to accelerate and see the kind of growth that we would expect. So we feel really good that the activities are paying off and that we're making a difference in the accounts that we're focusing on. I'd say longer term, when you think through 2024, we're looking for that to be more broadly replicated throughout the base of accounts so that we can continue these kinds of growth rates. But I'd say the efforts in the field are really starting to pay off, and we're looking for that to have a broader impact in 2024. In relative terms, I think the second part of your question was new account activations. We did see a couple of new account activations in 2023.
Speaker Change: More of that benefit in the second half of the year and then the other thing we've talked about on other calls as the encompass clamp our team our operations team and engineering team did really nice work throughout 2023 to say given the demand that we're seeing in this particular product line what are some ways that we can produce this product better and more efficiently but also.
Speaker Change: With some cost savings that we would anticipate later in 2024, So I think the big driver in 2024. When you think about gross margin is primarily mix, but knowing that there is some fundamental production efficiencies and some nice things happening within our operations that are that help be a tailwind to the overall number.
Speaker Change: Okay. Thank you.
Speaker Change: Very helpful.
Speaker Change: And then I guess, just a quick one on the new <unk> product.
Speaker Change: <unk>.
Speaker Change: You gave some commentary around around Dubai are on timing for the launch, but just maybe if you could talk about pricing. What you guys are thinking about that.
Angie Weirich: I'd say the focus of our team at this point in time is on existing accounts. I think as they operate throughout 2024, there's still a lot of interest from customers. There are still very under penetrated in terms of the universe of accounts that could have converged procedures or converged programs are still training new accounts. And I think the work that we're doing today to help existing accounts be more efficient and think about building their programs, I think, in the long term, will help us initiate new accounts and have them scale quickly. Really helpful, Andrew. Thanks for the added color there.
Especially with Medtronic coming into the market.
Speaker Change: Theres anything that Youre trying to hold back any price increases for that.
Speaker Change: Yeah. So first of all I'll comment on the product it's called the flex many.
Speaker Change: We did file for a 500 10-K.
Speaker Change: And we feel like this product is going to be incredibly well received it's about a third the profile and size of our product flex Z product on the market today.
Speaker Change: Incredibly easy to deploy all the testing that we've seen so far is that it is going to be by far and away. The most superior product on the market going forward, we have not determined our pricing strategy at this point and so we'll probably hold back in terms of discussing that in any kind of detail.
Michael H. Carrel: Maybe just flipping to Ahrefs Clip and maybe looking beyond maybe some of the competitive dynamics. But, you know, you also mentioned some guideline changes. And I'm just wondering if that can be maybe an additional tailwind to the underlying market and adoption for the clip business. Thanks for taking the question. Yeah, absolutely.
Speaker Change: But we're evaluating what the best pricing strategy is right now.
Speaker Change: Okay, great. Thanks, so much and congrats on a great quarter.
Speaker Change: Thanks.
Speaker Change: Thank you.
Next question is from the line of standing start starter with citizens JMP. Your line is now open.
Michael H. Carrel: We think that the guidelines are pretty monumental for the entire space, and they're basically saying a class 1A recommendation is basically saying you should treat this appendage every single time somebody has atrial fibrillation today. And that is not just the cardiac surgeons doing it, but ACC and AHA to the referring cardiology community are basically saying everybody needs to treat the appendage when they're undergoing cardiac surgery. And so absolutely, we think that's a really good sign for this market overall. And obviously, AtriClip is being used to manage the appendage by many people around the globe. So it's a great validation, just like competition is a great validation of the space and what we're doing there. And then, obviously, we're expanding that market with LEAPS so that, eventually, the data we get with that changes the guidelines for every patient, not just those that have AFib. That's our goal with that. That's why we're investigating it.
Speaker Change: Great. Thanks can you hear me.
Speaker Change: Okay.
Speaker Change: We can hear you.
Great.
Speaker Change: First of all I, just wanted to ask broadly about procedure volumes.
Speaker Change: Just we've heard from some of your peers Ramadan elevated volume levels and I just wanted to get your color on that and particularly as it relates to the open surgical market.
Speaker Change: Have you seen any notable change in valve or cabot's procedures.
Speaker Change: Led to some of the growth in open ablation.
Speaker Change: Youre open.
Speaker Change: Procedures.
Speaker Change: Yes, I don't know that we've seen any kind of dramatic improvement there's been steady improvements since COVID-19, but I think we're in a good normalized period now where typically youll see cardiac surgery are growing in the kind of 1% to 2% per year and I don't I don't think we've seen anything different from that over.
Speaker Change: Over the course of the last year or so I've heard different reports that that might change and you might start to see some improved.
Michael H. Carrel: And you can see the excitement with 1,700 patients already enrolled in a 6,500 person trial. It's pretty remarkable to see that kind of growth. That's the excitement people have and the belief in managing the appendage.
Speaker Change: Growth across the procedure in 2024 from some places I know HCA talked about it on one of their calls.
Speaker Change: Of their cardiac surgery volumes I don't know that Ive heard that across every single every single system. So I guess.
Operator: Thanks again for taking the question. Thank you. Our next question comes from the line of Joseph Conway with Needham. Your line is now open. Hi, Mike. Hi, Angie.
Speaker Change: I'd say right now im cautiously optimistic on that one.
Speaker Change: Great. Thank you and then just one follow up.
Speaker Change: Appendage management.
Speaker Change: The growth in Mif's ablation was great to see but with that are you seeing an uptick in some of your eight year cliff.
Angie Weirich: Cheers, sis. On for Mike. I guess maybe just touching on gross margin improvement in the quarter. I think Angie called out some production efficiencies, and looking into 2024, I think in the comments, you guys talked about just being in line for 2024, potential modest improvement. I was just wondering if you could maybe give some more color around, you know, what happened in this quarter and some of those cost-saving initiatives that you expect to roll out this year and how you expect that to be phased. Yeah, so what you saw in the fourth quarter, really strong production efficiencies, offsetting, we had quite a few headwinds coming from the mix of our international business. That led to an improvement off of 2020 and 2022, the fourth quarter comp.
Minimally invasive.
Speaker Change: Procedures, and then could you remind us where that each equipped mix of open to sit.
Speaker Change: Sit today, and how has that changed over the past year, or so and where you think that could go in 2020 quarter. Thank you.
Speaker Change: Yeah that was a that was a nice byproduct of the strength of our MS business in the fourth quarter, we saw an uptick in our mis appendage management.
Speaker Change: <unk> pro products.
Speaker Change: Realizing pretty equal growth to the open clip products, leading to about 22% growth for the fourth quarter in the U S.
Speaker Change: And our attachment rates, we continue to see a steady increase in attachment a year or so ago, we were talking about around a 75% attachment to our converge procedure and now are I'd say kind of mid <unk> at this point in time and continue to receive really good strong feedback from accounts that are starting converged programs or have adopted converge programs the interest in <unk>.
Angie Weirich: And as we enter into 2024, I'd say, kind of more of the same, you're going to see nice improvements. If the only thing that we saw was improvements to kind of production efficiencies with the same kind of mix of revenue, you'd see some nice improvements in 2024. But we are expecting some headwinds given the mix anticipation in 2024.
Speaker Change: Treating the appendage surgically during the converge procedure as.
As we exited the year when you look at our U S appendage management business about 25% of the revenue was from our mis.
Speaker Change: Business and about 75% of the revenue within our open clip business and I think given the strength of both of those franchises are open and Mis ablation businesses would expect for that next to remain relatively similar with the potential for upside I think for the Ms product.
Angie Weirich: We've talked about in the past a couple of areas where we expect to see some improvements in margin. The first would be with the launch of the cryosphere plus probe. To the extent that the adoption of that probe takes off in comparison, you know, or replaces our existing cryosphere probe, there is a nice benefit to our gross margin. Again, our launch is anticipated in the second quarter, so you would see more of that benefit in the second half of the year. And then the other thing we've talked about on other calls is the Encompass clamp. Our team, our operations team, and engineering team did really nice work throughout 2023 to say, given the demand that we're seeing in this particular product line, what are some ways that we can produce this product better and more efficiently.
Speaker Change: Great. Thanks very much.
Speaker Change: Thank you. Our next question comes from the line of Suraj Kalia with Oppenheimer <unk> Company. Your line is now open.
Suraj Kalia: Hi, Angie Mike can you hear me all right.
Suraj Kalia: We can hear you.
Suraj Kalia: Correct.
Suraj Kalia: Hey, Mike so couples esoteric questions was wondering if you could help us out.
Suraj Kalia: Good clip in general is it on consignment or is.
Speaker Change: Should we think about inventory also.
Mike: And more specifically as CEO enter FY 'twenty for just given all the dynamics in your.
Mike: Prepared remarks.
Mike: How should we think about the.
Mike: Pricing flow through.
Angie Weirich: They also have come with some cost savings that we would anticipate later in 2024. So I think a big driver in 2024 when you think about gross margin is primarily mix, but knowing that there are some fundamental production efficiencies and some nice things happening within our operations that help be a tailwind to the overall number. Okay, thank you. That was very helpful.
Mike: That you'll think about for FY 'twenty four.
Speaker Change: Yes on the consignment, we don't really have any consignment product that's not typically it's we're very much on kind of a use and then replace so we keep very very little inventory.
Speaker Change: However at sites just enough for them to kind of plan out the procedures and the upcoming week or two but we do not have a lot of inventory on shelf, that's actually purposeful we wanted to understand the demand.
Speaker Change: And we've got great inventory here to be able to supply that on a real time basis. We've got 99, 8% kind of delivery to make sure that no patient is not being treated from that standpoint.
Michael H. Carrel: And then I guess just a quick one on the new AtriClip product. You gave some commentary around timing for the launch, but just maybe if you could talk about pricing, what you guys are thinking about that, especially with Medtronic coming into the market, if there's anything that, you know, you're trying to hold back any price increases for that. Yeah, so first of all, I'll comment on the product. It's called the Flex Mini.
Speaker Change: The price we feel like we've got a really good pricing strategy today, we've obviously got a product in the market. Our initial one our original ATRA clip kind of that kind of first three generations of the product are out there today those are priced at a lower level. The flex V, which was our premium product today is also in the market our highest priced product on the minimally invasive products.
Speaker Change: Above that so I think we're in a really good position relative to pricing today.
Speaker Change: And we don't have any specific things to change anything on that front in the near future.
Michael H. Carrel: We did file for $510K, and we feel like this product is going to be incredibly well received. It's about a third the profile and size of our product, our Flex Z product on the market today. It's incredibly easy to deploy.
Speaker Change: Got it.
Speaker Change: In terms of a triplet many.
Speaker Change: Is this just a desire for product stratification and what Im looking at is in terms of complete isolation of the FAA.
Michael H. Carrel: All the testing that we've seen so far is that it is going to be, by far and away, the most superior product on the market going forward. We have not determined our pricing strategy at this point, and so we'll probably hold back in terms of discussing that in any kind of detail, but we're evaluating what the best pricing strategy is right now. Okay, great.
Speaker Change: Presumably growing a smaller form factor, so just kind of walk us through the rationale for introducing many.
Speaker Change: And Michael to remind us.
Speaker Change: In terms of persistent AF.
Speaker Change: Percent of the cases being done by <unk> today are persistent AF versus long standing persistent yes. Thank you for taking my questions.
Michael: Sure on the flex many we spent a lot of time as we mentioned in our comments, we had 500000 implants to date and we do a lot of work with our customers to figure out what improvements do they want to have to the product.
Michael H. Carrel: Thanks so much and congratulations on that great quarter. Thanks. Thank you. Our next question comes from the line of Danny Stotter with Citizens GMP. Your line is now open. Great, thanks. Can you hear me?
Michael: And so the biggest thing was really quite frankly, they wanted a smaller product, meaning that there's just a smaller profile overall that's.
Michael H. Carrel: We can hear you. Great. So first off, I just wanted to ask broadly about procedure volume. We've heard from some of your peers commenting on elevated volume levels, and just wanted to get your take on that. And particularly as it relates to the open surgical market, you know, have you seen any notable changes in valve or cabbage procedures that have, you know, led to some of the growth in open ablation and your open atrial clip procedures? Thanks.
That's where the flex many does it actually is about a third the profile of the other products.
Michael: And that's the biggest benefit that people are going to get relative to using that also as many of you may know, we've got a V shaped product and we also have a <unk> product, which was the original product that we had on the market. The <unk> product is the one.
Michael: That does not have as good of a deployment as the <unk> product and so many people wanted a <unk> product that was smaller and had a very nice and easy unusable deployment tool with it as well and so that was the primary feedback that we got from people and Thats effectively what the mini brings to market. In addition to that in <unk>.
Michael H. Carrel: Yeah, I don't know that we've seen any kind of dramatic improvement. There's been steady improvement since COVID, but I think we're in a good normalized period now where typically you'll see cardiac surgery going in that kind of one to two percent per year. And I don't I don't think we've seen anything different than that over the course of the last year or so.
Michael: As important is that the mini is also going to be used in our we have the pro V product for minimally invasive and we will have a pro many product as well that will come out in late 2025 likely and that product is going to be able to go through at least the seven millimeter, possibly a five millimeter trocar to make.
Michael H. Carrel: I've heard different reports that that might change, and you might start to see some improved growth across the procedure in 2024 from some places. I know HCA talked about it on one of their calls in terms of their cardiac surgery volumes, but I don't know that I've heard that across every single every single system.
Michael: It even less invasive.
Michael: Somebody actually has to do the procedure from a minimally invasive perspective so.
Michael H. Carrel: So I guess I'd say right now I'm cautiously optimistic about that. Great, thank you. And then this one follow-up, turn it to appendage management. The growth in MIS ablation was great to see, but with that, are you seeing an uptick in your AtriClip minimally invasive procedure? procedures, and then could you remind us where that AtriClip mix has opened up to MIS today, and how it has changed over the past year or so, and where you think it could go in 2024? Thank you.
Michael: The product by being so the profile being so small it can go through those smaller trocar, if there's a big benefit on that.
Speaker Change: In terms of your second question I guess.
Speaker Change: I believe youre, probably talking about the converge area in terms of the kind of the distinction between persistent and longstanding persistent our label is for long standing persistent that's what we talked to I would say most of the patients fit within the long standing persistent marketplace very few are persistent patients.
Angie Weirich: That was a nice byproduct of the strength of our MIS business in the fourth quarter. We saw an uptick in our MIS appendage management products, the AtriClip Pro products, realizing pretty equal growth to the open AtriClip products, leading to about 22% growth in the fourth quarter in the U.S. Attachment rates, we continue to see a steady increase in attachment. A year or so ago, we were talking about around a 75% attachment to our converged procedure, and now we're, I'd say, kind of in the mid-80s at this point in time, and continue to receive really good, strong feedback from accounts that are starting converged programs or have adopted converged programs about the interest in treating the appendage surgically during the converged procedure.
Speaker Change: In terms of what we're seeing most of the patients that we see.
Speaker Change: Are patients that have had failed catheter ablation, one two or three failed catheter ablation before they then go to a convergent or a hybrid type of procedure and so I believe that might be what you're referring to.
Speaker Change: And hopefully I answered that question.
Speaker Change: Sure. Thank you.
Speaker Change: Thank you. This concludes the question and answer session I would now like to hand, the call back over to Mike Carroll CEO for closing remarks.
Speaker Change: Great.
Michael H. Carrel: Again, everybody. Thank you for joining us today, and we look forward to having a great 2024 together have a good one bye now.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Angie Weirich: As we exited the year, when you look at our U.S. appendage management business, about 25% of the revenue was from our MIS AtriClip business, and about 75% of the revenue was from our OpenClip business. And I think, given the strength of both of those franchises, our open and MIS ablation businesses would expect that next to remain relatively similar, with the potential for upside, I think, for the MIS. Great, thank you very much.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Angie Weirich: Thank you. Our next question comes from the line of Suraj Kalia with Oppenheimer & Company. Your line is now open. Hi Angie, Mike, can you hear me alright? We can hear you. Perfect. Hey, Mike, so a couple of esoteric questions.
Speaker Change: Sure.
Speaker Change: Hum.
Speaker Change: Yes.
Speaker Change: [music].
Michael H. Carrel: I was wondering if you could help us out. AtriClip, in general, is it on consignment, or should we think about inventory also? And more specifically, as you enter FY24, just given all the dynamics and your prepared remarks, how should we think about the pricing flow through?
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Michael H. Carrel: that you'll think about for FY24. Yeah, on the consignment, we don't really have any consignment products. That's not typically it's we're very much on kind of a use and then replaced. So we keep very, very little inventory whatsoever at sites, just enough for them to kind of plan out the procedures in the upcoming week or two. But we do not have a lot of inventory on the shelf. That's actually purposeful.
Speaker Change: Yes.
[music].
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Michael H. Carrel: We want to understand the demand, and we've got great inventory here to be able to supply that on a real-time basis. We've got ninety nine point eight percent of delivery to make sure that no patient is not being treated from that standpoint.
Speaker Change: Yes.
Speaker Change: Yes.
Michael H. Carrel: Related to price, we feel like we've got a really good pricing strategy today. We've obviously got a product in the market. Our initial one, our original AtriClip, the kind of first three generations of the product are out there today. Those are priced at a lower level.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yes.
Michael H. Carrel: The FlexV, which was our premium product today, is also in the market. Our highest priced product of the minimally invasive products is above that. So I think we're in a really good position relative to pricing today. And we don't have any specific things to change anything on that front in the near future.
Speaker Change: [music].
Michael H. Carrel: Mike, in terms of Atriclep Mini, is this just a desire for product stratification? And what I'm looking at is in terms of complete isolation of the LAA, you know, you're presumably going to a smaller form factor. So just kind of walk us through the rationale for introducing Mini. And Mike, also remind us in terms of persistent AF.
Speaker Change: Thank you.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Yes.
Michael H. Carrel: What percent of the cases being done by AtriCure today are persistent AF versus longstanding persistent AF? Thank you for taking the time to answer my question. Sure, on the Flex Mini, we spent a lot of time, as we mentioned in our comments, we've had 500,000 implants to date. And we do a lot of work with our customers to figure out what improvements they want to have to the product. And so the biggest thing was really, quite frankly, they wanted a smaller product, meaning that just a smaller profile overall. That's what the Flex Mini does.
Speaker Change: Yes.
Speaker Change: Thanks.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Michael H. Carrel: It actually is about a third the profile of the other products. And that's the biggest benefit that people are gonna get relative to using that. Also, as many of you may know, we have a V-shaped product, and we also have a hoop-like product, which is the original product that we had on the market. The hoop-like product is the one that does not have as good of a deployment as the V-clip
Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
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Speaker Change: Yes.
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Michael H. Carrel: And so many people wanted a hoop-like product that was smaller and had a very nice and easy and usable deployment tool with it as well. And so that was the primary feedback that we got from people. And that's effectively what the Mini brings to the market.
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Michael H. Carrel: In addition to that, and probably as important, is that the Mini is also gonna be used in our Pro-V product for minimally invasive surgery, and we will have a Pro-Mini product as well that'll come out in late 2025, likely. And that product is gonna be able to go through at least a seven millimeter, possibly a five millimeter trocar to make it even less invasive as somebody actually has to do the procedure from a minimally invasive perspective. So the product, by being so small, the profile being so small, it can go through those smaller trocars, and there's a big benefit to that. In terms of your second question, I guess I believe you're probably talking about the Converge area in terms of the kind of distinction between persistent and longstanding persistent.
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Michael H. Carrel: Our label is for longstanding persistent. That's what we talk to. I'd say most of the patients fit within the longstanding persistent marketplace. Very few are persistent patients in terms of what we're seeing.
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Michael H. Carrel: Most of the patients that we see are patients that have had failed catheter ablations, one, two, or three failed catheter ablations before they then go to a convergent or hybrid type procedure. And so I believe that might be what you're referring to. And hopefully, I have answered that question.
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Michael H. Carrel: Fair enough, thank you. This concludes the question and answer session. I'd now like to hand the call back over to Mike Carrel, CEO, for closing remarks. Great. Again, everybody, thank you for joining us today, and we look forward to having a great 2024 together. Have a good one.
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Operator: Bye now. This concludes today's conference call. Thank you for your participation. You may now disconnect. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Good afternoon. And welcome to AtriCure's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in listen-only mode.
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Marissa Baish: We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Baish from the Gilman Group for an introductory comment. Great, thank you, and good afternoon. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call 513-644-4484 to have one emailed to you.
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Marissa Baish: Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control, including risks and uncertainties described from time to time in AtriCure's SEC filings. These statements include, but are not limited to, financial expectations and guidance, expectations regarding the potential market opportunity for AtriCure's franchises and growth initiatives, future product approvals, clearances, reimbursement, and clinical trial outcomes. However, AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statement.
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Marissa Baish: Additionally, we refer to non-GAAP financial measures, specifically revenue reported on a constant currency basis, adjusted EBITDA, and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website. And with that, I would like to turn the call over to Mike Carrel, President and CEO. Good afternoon, and thank you for joining us today.
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Michael H. Carrel: 2023 was an exceptional year at AtriCure, and I am proud to report a strong finish with fourth-quarter growth of 21%, showing robust momentum throughout our entire business. Our full-year revenue of $399 million represents 21% over 2022, our third consecutive year of above 20% revenue growth. Globally, we saw increasing adoption of our broad portfolio of products for the treatment of atrial fibrillation, the left atrial appendage, and postoperative pain. Our patient impact extended further than before, resulting in the achievement of our one millionth patient treated with AtriCure technology. In addition, our top line performance and increasing leverage drove $19 million of positive adjusted EBITDA in 2023, making significant progress towards sustained profitability throughout our business. Before sharing operational highlights of the fourth quarter of 2023, I would like to frame the opportunity in front of AtriCure now.
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Michael H. Carrel: We identify markets where patients are underserved and create standards of care to improve these patients' lives. We know that creating new standards of care requires sustained investment and innovation in clinical science and comprehensive education and awareness.
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Michael H. Carrel: Investing across these areas has allowed us to unlock new opportunities over the last two decades, and we are now positioned to offer solutions for millions of patients worldwide. This translates to a more than $5 billion global market opportunity today with significant potential to expand our market opportunity in the future. AtriCure is in a unique position as a leader in each of our markets, with every market still significantly underpenetrated.
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Michael H. Carrel: Therefore, we remain focused on driving adoption, as well as identifying and cultivating new opportunities to drive strong growth for many years to come. As such, we are reiterating our expectations for full-year 2024 revenue of $459 to $466 million, reflecting 15 to 17 percent growth over 2023. We are also reaffirming our expectations to achieve adjusted EBITDA of $26 to $29 million for the full year, with improvements annually thereafter as we progress towards positive cash flow. Now, we shift to highlights of the quarter and 2023, starting with the open ablation franchise, where our ablation solutions for the treatment of AFib are used concomitantly with open heart surgery. In the fourth quarter, we surpassed 10,000 patients treated with our Encompass Clamp and achieved the best quarter yet for Encompass Clamp sales, which accounted for nearly half of our U.S. open ablation revenue for the quarter.
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Michael H. Carrel: The uptake of this product has been extraordinary since Baud's commercial launch in early 2022. At the recent Society of Thoracic Surgeons Conference, I heard from many surgeons about the impact this device is having on patients, expanding our reach throughout cardiac surgery procedures. Globally, our open ablation franchise achieved 21% annual growth in 2023, showing a continued elevation over historical growth rates in this franchise. As we begin 2024, we are confident in the increasing adoption of the Encompass clamp in the United States and look forward to the European launch later in the year and other markets in the future. Next, turning to appendage management. Atriflip products for left atrial appendage closure in both open heart and minimally invasive procedures remain a foundation of our business. In many markets around the world, atrial clip devices are leading our growth as left atrial appendage management becomes the standard of care in cardiac surgery.
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Speaker Change: Good afternoon.
Speaker Change: And welcome to <unk> fourth quarter, and full year 2023 earnings conference call.
Speaker Change: At this time all participants are in a listen only mode.
Michael H. Carrel: We are excited to have seen the SDS, AHA, and ACC all elevate surgical LA exclusion to class 1A within their guidelines recently, and we expect this evolution in guidelines to propel strong continued growth for our business. Overall, our panda management business grew 21% in 2023, and we closed out the year with an acceleration in quarterly growth at 24% for the fourth quarter. Our growth was driven primarily by sales of Atriclip Flex-V, Pro2, and Pro-V devices, reflecting strong attachment to both open and minimally invasive procedures and is indicative of the immense opportunity that is still ahead. To that end, we celebrated a milestone in 2023 with more than half a million atrial clip devices sold to date. This milestone stands on AtriCure's longstanding commitment and decades of innovation and research, which we are continuing in 2024 and beyond.
Speaker Change: We will be facilitating a question and answer session towards the end of today's call.
Speaker Change: As a reminder, this call is being recorded for replay purposes.
Speaker Change: I would now like to turn the call over to Marissa buys the Gilman group for introductory comments.
Marissa: Great. Thank you and good afternoon, I know you should have received a copy of the earnings press release.
You have not received a copy please call 500 36444484 to have one E mailed to you.
Speaker Change: Before we begin today, let me remind you that the Companys remarks include forward looking statements forward.
Forward looking statements are subject to numerous risks and uncertainties many of which are beyond <unk> control, including risks and uncertainties described from time to time in <unk> SEC filings. These.
Speaker Change: These statements include but are not limited to financial expectations and guidance expectations regarding the potential market opportunity for <unk> franchises and growth initiatives.
Michael H. Carrel: In late 2023, we submitted a 510k clearance notification to the FDA for our next generation Atriclip device, the Flex Mini, which builds off our proven technology to increase ease of use and significantly decrease the size of our Atriclip device, which already has the smallest profile on the market. We anticipate clearance in late 2024, with the U.S. launch following quickly thereafter. Additionally... To extend our potential patient impact, we are actively investigating the application of AtriCure devices in patients with preoperative AFib diagnosis through our LEAPS clinical trial. The LEAP trial seeks to demonstrate a clinically meaningful reduction in ischemic and systemic atrial or arterial embolism, differentiating our atrial clopidotic from all other appendage management options in cardiac surgery and expanding our addressable markets globally. Enrollment in LEAPS began in late January 2023 and accelerated throughout the year.
Speaker Change: Product approvals clearances reimbursement and clinical trial outcomes.
Speaker Change: <unk> results may differ materially from those projected.
Speaker Change: <unk> undertakes no obligation to publicly update any forward looking statements.
Speaker Change: Additionally, we refer to non-GAAP financial measures, specifically revenue reported on a constant currency basis, adjusted EBITDA and adjusted loss per share.
Speaker Change: A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website.
Speaker Change: And with that I would like to turn the call over to Mike Carrel, President and CEO.
Michael H. Carrel: Good afternoon, and thank you for joining us today too.
Michael H. Carrel: 2023 was an exceptional year at <unk> and I am proud to report a strong finish with fourth quarter growth of 21% showing robust momentum throughout our entire business.
Michael H. Carrel: We ended 2023 far ahead of our internal expectations, and as of today, we have enrolled over 1,700 patients in the study. We are expanding clinical trial sites in 2024 and expect first enrollment from centers in Europe in the coming weeks. However, the trial will take several years to complete.
Michael H. Carrel: Our full year revenue of $399 million represents 21% over 2022, our third consecutive year of above 20% revenue growth and globally, we saw increasing adoption of our broad portfolio of products for the treatment of atrial fibrillation, the left atrial appendage and post operative pain or.
Michael H. Carrel: The pace of enrollment both validates our decision to embark on this trial and underscores the excitement from clinicians and patients. Moving now to our Pain Management Franchise, where a cryosphere probe provides temporary relief for post-operative pain. Since the launch in 2019, the Cryosphere device has exhibited remarkable growth, with full year 2023 revenue exceeding $50 million worldwide, reflecting growth of 26% year-over-year. The base of accounts we serve has expanded just as rapidly, and we saw more than 750 accounts purchasing globally in 2023. That said, to capitalize on the full market potential, we have several parallel efforts underway to add growth drivers for this business. First, our next-generation technology, the Cryosphere Plus probe, was cleared by the FDA in the fourth quarter. The Cryosphere Plus device will enable faster ablations, improving the efficiency of procedures.
Michael H. Carrel: Our patient impact extended further than before resulting in the achievement of our one millionth patient treated with <unk> technology.
Michael H. Carrel: In addition, our topline performance. In addition, our top line performance and increasing leverage drove $19 million of positive adjusted EBITDA in 2023, making significant progress.
Michael H. Carrel: Towards sustained profitability throughout our business.
Before sharing operational highlights of the fourth quarter of 2023.
Speaker Change: I would like to frame the opportunity in front of <unk> now.
We identify markets, where patients are underserved and create standards of care to improve these patients' lives.
Speaker Change: We know that creating new standards of care requires sustained investment in innovation.
Speaker Change: Clinical science and comprehensive education and awareness.
Speaker Change: Investing across these areas has allowed us to unlock new opportunities over the last two decades, and we are now positioned to offer solutions for millions of patients worldwide.
Michael H. Carrel: Recently, we completed the first procedures with this device with a 25% reduction in ablation time. We expect to move to full launch in the second quarter. We are also conducting economic studies and partnering with multiple centers to expand clinical data to better illustrate the value proposition of crown-nerve block therapy. We will continue to invest in commercial resources worldwide to promote awareness of this important alternative to traditional pain management practices. Lastly, while we focus on driving adoption in thoracic and sternotomy procedures, we are carefully evaluating potential new applications and market opportunities for cryo-nerve block therapy and look forward to updating you on progress.
Speaker Change: This translates to a more than $5 billion global market opportunity today with significant potential to expand our market opportunity in the future.
Speaker Change: <unk> is in a unique position as a leader in each of our markets with every market still significantly underpenetrated.
Speaker Change: Therefore, we remain focused on driving adoption as well as identifying and cultivating new opportunities to drive strong growth for many years to come.
Speaker Change: As such we are reiterating our expectations for full year 2020 for revenue of $459 million to $466 million, reflecting 15% to 17% growth over 2023.
Speaker Change: We are also reaffirming our expectations to achieve adjusted EBITDA of $26 million to $29 million for the full year with improvements annually thereafter, as we progressed towards positive cash flow.
Michael H. Carrel: Rounding out our portfolio is hybrid AF therapy, focusing on standalone treatment of the millions of patients with longstanding persistent AFib. We ended 2023 on a high note, with 27% year-over-year franchise growth in the fourth quarter. As I've said on several calls over the past year, 2023 was a building year for hybrid AF therapy to ensure a strong foundation for lasting success throughout our accounts and leading to accelerating growth in the future. We are thoughtful about partnering with our customers to address workflow challenges and comprehensively understand their needs for program expansion. Our fourth-quarter results confirmed that our work throughout 2023 is having an impact, and we will continue our efforts into 2024. We expect 2024 to be an exciting year for standalone treatment of AFib, as peers introduce PFA catheter technology in the U.S. market. The focus on more efficient endocardial ablation driven by PFA should provide a tailwind for everyone in the AFib market. Our hybrid approach remains complementary to PFA, just as it is complementary to other energy sources used in endocardial procedures. Further, AF therapy remains the only proven solution for long-term, persistent AFibvation.
Speaker Change: Now shifting to highlights of the quarter and 2023.
Speaker Change: Starting with the open ablation franchise, where our ablation solutions for the treatment of Afib or use concomitant to open heart surgery.
In the fourth quarter, we surpassed 10000 patients treated with our encompass clamp and achieved the best quarter, yet for encompass clamp sales, which accounted for nearly half of our U S. Open ablation revenue for the quarter.
Speaker Change: The uptake of this product has been extraordinarily since the broad commercial launch in early 2022.
Speaker Change: At the recent society of thoracic Surgeons conference.
Speaker Change: For many surgeons about the impact this device is having on patients.
Speaker Change: Expanding our reach through our cardiac surgery procedures.
Globally, our open ablation franchise achieved 21% annual growth in 2023, showing a continued elevation over historical growth rates in this franchise.
Speaker Change: As we begin 2024, we are confident and the increasing adoption of the encompass clamp in United States and look forward to the European launch later in the year and other markets in the future.
Speaker Change: Next turning to appendage management.
Speaker Change: Acre foot products for left atrial appendage closure in both open heart and minimally invasive invasive procedures.
Speaker Change: We remain a foundation of our business.
Speaker Change: In many markets around the world <unk> devices are leading our growth has left atrial appendage management becomes the standard of care in cardiac surgery.
Michael H. Carrel: In addition to our converged trial results, there is a rapidly growing body of clinical evidence from independent studies and registries showing catheter ablation alone is not an effective treatment for patients with advanced AFib. In 2023, data from our CEASE-AF study and DEEP-AF clinical trial provided even more support for a hybrid approach. Moreover, recent updates to clinical guidelines published by AHA and ACC demonstrate the importance of hybrid AF therapy. As such, we will continue to build our program development efforts with the goal of delivering efficient, scalable workflows for a broader base of customers. We have a strong conviction in the accelerating adoption of our hybrid AF therapy for the millions of patients suffering from long-standing persistent atrial fibrillation. In summary, 2023 was another truly exceptional year for AtriCure, defined by major milestones in patient impact and accelerating top and bottom line growth. We are excited to carry this momentum into 2024 as we advance adoption of our therapies and invest in future growth prospects that will propel AtriCure forward for many years to come. And with that, I will turn the call over to Angie Weirich, our Chief Financial Officer. Angie
Speaker Change: We are excited to have seen the Sts.
Speaker Change: Jay and ACC.
All elevate surgical exclude.
Speaker Change: Exclusion to class one within their guidelines recently and we expect this evolution and guidelines to propel strong continued growth for our business.
Speaker Change: Overall, our appendage management business grew 21% in 2023, and we closed out the year with an acceleration in quarterly growth at 24% for the fourth quarter.
Our growth was driven primarily by sales of <unk> Flex V Pro two and pro V devices, reflecting strong attachment to both open and minimally invasive procedures.
Speaker Change: And is indicative of the immense opportunity that is still ahead.
Speaker Change: To that end, we celebrated a milestone in 2023 with more than a half a million <unk> devices sold to date.
Speaker Change: This milestone stands on <unk> long standing commitment and decades of innovation and research.
Speaker Change: Which we are continuing in 2024 and beyond.
Speaker Change: In late 2023, we submitted a 500 10-K clearance notification to the FDA for our next generation <unk> device, the flex, many which builds off our proven technology to increase ease of use and significantly decrease the size of our <unk> device.
Speaker Change: Which already has the smallest profile on the market.
Speaker Change: We anticipate clearance in late 2024 with the U S launch following quickly thereafter.
Angie Weirich: Thank you, Mike. Our fourth quarter 2023 worldwide revenue of $106.5 million increased 21% on a reported basis and 20.5% on a constant currency basis when compared to the fourth quarter of 2022. U.S. revenue was $88.8 million, a 20.1% increase from the fourth quarter of 2022, reflecting robust activity across each franchise, highlighted by an uptick in adoption of our hybrid AF therapy, representing 30.6% growth for the quarter, along with continued strength from key appendage management, open ablation, and pain management products. International revenue totaled $17.8 million, up 25.8% on a reported basis and up 22.1% on a constant currency basis as compared to the fourth quarter of 2022.
Speaker Change: Additionally.
Speaker Change: To extend our potential patient impact we're actively investigating the application of <unk> devices and patients with preoperative Afib diagnosis.
Speaker Change: Our Leafs clinical trial.
Speaker Change: The leaf trial seeks to demonstrate a clinically meaningful reduction in ischemic and systemic atrial arterial embolism differentiating our <unk> product from all other appendage management options in cardiac surgery, and expanding our addressable markets globally.
Speaker Change: Enrollment began in late January 2023, and accelerated throughout the year.
Speaker Change: We ended 2023 far ahead of our internal expectations and as of today, we have enrolled over 700 patients in the study.
Speaker Change: We are expanding clinical trial sites in 2024, and expect first enrollment from centers in Europe in the coming weeks.
Speaker Change: While the trial will take several years to complete.
Speaker Change: The pace of enrollment both validates our decision to embark on this trial and underscores the excitement from clinicians and patients.
Angie Weirich: We continue to see strong demand for our differentiated solutions in major international markets with significant growth in appendage management and pain management, sequentially worldwide sales of $8.3 million or 8.4% over Q3 2023. Gross margin for the fourth quarter 2023 was 74.9%, up 94 basis points from the fourth quarter of 2022. The increase was driven primarily by favorable production efficiencies, partially offset by less favorable geographic and product mix.
Speaker Change: Moving now to our pain management franchise, where a prowler pro provides temporary relief for post operative pain.
Speaker Change: Since the launch in 2019, the crossover device has exhibited remarkable growth with full year 2023 revenue exceeding $50 million worldwide, reflecting growth of 26% year over year.
Speaker Change: The base of accounts, we serve has expanded just as rapidly and we saw more than 750 accounts purchasing globally in 2023.
Angie Weirich: In the fourth quarter 2023, research and development expenses increased $7 million, or 51%, and SDNA expenses increased $12.2 million, or 22%, over the fourth quarter 2022. Turning to the bottom line, we drove positive adjusted EBITDA of $4.8 million for the fourth quarter 2023 compared to positive adjusted EBITDA of $6 million for the fourth quarter 2022. While we are continuing to drive improvement in gross margin and realizing operating leverage in our commercial and administrative infrastructure, we experienced a significant increase in research and development costs in the fourth quarter of 2023 due to the rapid enrollment and expansion of our LEAPs clinical trial and multiple product development initiatives underway. Our loss per share and adjusted loss per share was $0.21 for the fourth quarter 2023 compared to a loss per share and adjusted loss per share of $0.09 for the fourth quarter 20 U.S. sales increased 20.3% to $333.5 million, and international sales increased 23.5%, or 22.1% on a constant currency basis, to $65.7 million.
Speaker Change: That said to capitalize on the full market potential we have several parallel efforts underway to add growth drivers for this business.
Speaker Change: First our next generation technology, the cryo sphere, plus probe was cleared by the FDA in the fourth quarter.
Speaker Change: The cryo sphere, plus device will enable faster ablation improving efficiency of procedures.
Speaker Change: Recently, we completed the first procedures with this device with a 25% reduction in ablation time.
Speaker Change: We expect to move to full launch in the second quarter.
Speaker Change: We are also conducting economic studies and partnering with multiple centers to expand clinical data to better illustrate the value proposition of cryo nerve block therapy.
Speaker Change: We will continue to invest in commercial resources worldwide to promote awareness for this important alternative to traditional pain management practices.
Speaker Change: Lastly, while we focus on driving adoption and thoracic and Sternotomy procedures, we are carefully evaluating potential new applications and market opportunities for cryo nerve block therapy and look forward to updating you on progress.
Speaker Change: Finally.
Rounding out our portfolio is hybrid <unk> therapy.
Speaker Change: Focusing on Standalone treatment of the millions of patients with long standing persistent afib.
Speaker Change: We ended 2023 on a high note with 27% year over year franchise growth in the fourth quarter.
Speaker Change: As I've said on several calls over the past year 2023 was a building year for hybrid <unk> therapy to ensure a strong foundation for lasting success throughout our accounts and leading to accelerating growth in the future we.
Speaker Change: We were thoughtful about partnering with our customers to address workflow challenges and comprehensively understand their needs for program expansion.
Speaker Change: Our fourth quarter results confirmed that our work throughout 2023 is having an impact and we will continue our efforts into 2024.
Speaker Change: We expect 2024 to be an exciting year for standalone treatment of Afib.
Angie Weirich: The continued expansion of the Encompass clamp drove U.S. open ablation sales to $105.3 million, or 22.3% growth over 2022. In 2023, our U.S. pay management franchise grew 23.1 percent to 49.2 million dollars from increasing activity in existing accounts along with new account adoption. USMIS revenue was $44.6 million, reflecting single-digit growth in our legacy device sales, bolstered by approximately 18% growth in EpiSense sales, where we are successfully laying the groundwork for long-term growth.
Speaker Change: <unk> introduced PFA catheter technology in the U S market.
Speaker Change: The focus on more efficient endocardial ablation, driven by PFA should provide a tailwind for everyone in the afib market.
Speaker Change: Our hybrid approach remains complementary to PSA just as it is complementary to other energy sources used an endocardial procedures.
Speaker Change: Further <unk> therapy remains the only.
Proven solution for launched hybrid <unk> therapy remains the only proven solution for long standing persistent afib patients in.
Speaker Change: In addition to our converge trial results. There is a rapidly growing body of clinical evidence from independent studies and registries showing catheter ablation alone is not an effective treatment for patients with advanced Afib.
Angie Weirich: 2023 U.S. appendage management sales reached $134.5 million, a 19.5% increase over 2022, driven largely by our Atriclip FlexFeed device. And much like US transit activity in 2023, our international revenue growth was propelled by appendage management, open ablation, and pain management products. Gross margin for the year ended at 75.2%, an increase of 79 basis points from 2022.
Speaker Change: In 2023 data from our cease AF study and deep AF clinical trial provided even more support for a hybrid approach.
Moreover, recent updates to clinical guidelines published by AJ and ACC demonstrate the importance of hybrid <unk> therapy.
Speaker Change: As such we will continue to build our program development efforts with the goal of cementing efficient scalable workflows for a broader base of customers.
Speaker Change: We have a strong conviction and the accelerating adoption of our hybrid <unk> therapy for the millions of patients suffering from long standing persistent atrial fibrillation.
Angie Weirich: Similar to our fourth quarter results, the increase in gross margin reflects production efficiencies realized throughout the year, partially offset by a less favorable geographic and product mix. Moving to operating expenses, full year 2023 operating expenses increased 13.3% to $327.1 million from $288.6 million in 2022. Research and development costs expanded by $16.6 million, or 28.9%, on both clinical trial and product development project spend as we extend our pipeline with clinical evidence and innovation. SD&A expenses increased $21.9 million, or 9.5%, with leverage in our training and education programs, commercial team, and infrastructure driving down operating expenses as a portion of revenue, in addition to a one-time benefit in 2023 from a legal settlement. We remain focused on continued efficiencies in SG&A while maintaining investments in R&D for future expansion. Full year 2023 adjusted EBITDA was positive $19.4 million dollars compared to a negative $2.2 million dollars in 2022, an improvement of $21.6 million dollars. Our loss per share was 66 cents in 2023 compared to a loss per share of $1.02 in 2022. Adjusted loss per share was $0.75 and $1.02, respectively.
Speaker Change: In summary, 2023 was another truly exceptional year for <unk> defined by major milestones and patient impact and accelerating top and bottom line growth.
Speaker Change: We are excited to carry this momentum into 2024, as we advance adoption of our therapies and invest in future growth prospects that will propel <unk> forward for many years to come and with that I will turn the call over to Andrew <unk>, Our Chief Financial Officer, Andrew Thank.
Andrew: Thank you Mike.
Andrew: Our fourth quarter 2023 worldwide revenue of $106 $5 million increased 21% on a reported basis and 25% on a constant currency basis, when compared to the fourth quarter of 2022.
<unk> revenue was $88 8, million% to 21% increase from the fourth quarter of 2022, reflecting robust activity across each franchise highlighted by an uptick in adoption of our hybrid <unk> therapy, representing 36% growth for the quarter along with continued strength from key appendage managed.
Andrew: <unk> opened ablation and pain management products.
Andrew: International revenue totaled $17 $8 million up 25, 8% on a reported basis and up 22, 1% on a constant currency basis as compared to the fourth quarter of 2022.
Andrew: We continue to see strong demand for our differentiated solutions and major international market with significant growth in appendage management and pain management.
Angie Weirich: We ended 2023 with $137.3 million of cash and investments, a robust working capital position, and the flexibility to fund future opportunities and investments. Finally, turning to our outlook for 2024. Consistent with our guidance in early January, we expect to achieve between $459 and $466 million in revenue for the year, reflecting growth of 15 to 17% over full year 2023 results. Embedded in our guidance is the assumption that product innovation and supporting clinical data will propel us to 15% growth and beyond. Also included in our guidance are market dynamics that include increasing competition. As we look at our progress with market development and the opportunities of each franchise, we expect our franchise growth rates in the United States to align closely with our expectations of 15 to 17% annual growth.
Andrew: <unk> worldwide sales grew $8 3 million or eight 4% over Q3 2023.
Andrew: Gross margin for the fourth quarter 2023 was 74, 9% up 94 basis points from fourth quarter of 2022.
Andrew: The increase was driven primarily by favorable production efficiencies, partially offset by less favorable geographic and product mix.
Andrew: Fourth quarter, 2023 research and development expenses increased $7 million or 51% and SG&A expenses increased $12 2 million or 22% over the fourth quarter 2022.
Andrew: Turning to the bottom line, we drove positive adjusted EBITDA of $4 8 million for the fourth quarter 2023, compared to positive adjusted EBITDA of $6 million for the fourth quarter 2022.
Andrew: While we are continuing to drive improvement to gross margin and realizing operating leverage in our commercial and administrative infrastructure, we experienced a significant increase in research and development costs in the fourth quarter of 2023 due to the rapid enrollment and expansion of our leaps clinical trial and multiple product development initiatives underway.
Angie Weirich: We continue to see growth in our pain management business through deepening use in thoracic procedures and the addition of clinical data to lead to even wider acceptance of this therapy. We believe the exceptional adoption of our Encompass clamp will continue to drive performance in open ablation while broader progress with hybrid AF therapy using our EpiSense system will lift MIS ablation growth in 2024. Complimenting these drivers is our AtriClip products, which we can see continuing delivery of steady growth over a large base of revenue. Additionally, we anticipate our international growth to remain on pace with the United States in 2024 and beyond.
Andrew: Our loss per share and adjusted loss per share was <unk> 21 for the fourth quarter 2023, compared to a loss per share and adjusted loss per share of <unk> for the fourth quarter 2022.
Andrew: Now to review full year 2023 result.
Andrew: Worldwide revenue was $399 $2 million, an increase of 28% on a reported basis and 26% on a constant currency basis.
Angie Weirich: In terms of revenue cadence for the year, we expect typical seasonality to inform 2024, with first quarter revenue likely to be flat to our fourth quarter of 2023. From a margin perspective, we expect 2024 gross margin to be in line with our 2023 results, with potential for modest improvement from cost savings initiatives later this year. We anticipate headwinds from product and geographic mix, as well as increasing material costs to be offset by continued production efficiencies and leveraging scale within our operations as we grow. And, as we have said before, our primary focus of capital allocation is to incubate the next set of growth drivers for AtriCure. Therefore, we expect to maintain R&D as a percentage of revenue at roughly 19 to 20% in 2024.
Andrew: U S sales increased 23% to $333 5 million and international sales increased 23, 5% or 22, 1% on a constant currency basis to $65 $7 million.
Andrew: The continued expansion of the encompass clamp drove U S. Open ablation sales to $105 3 million or 22, 3% growth over 2022.
Andrew: In 2023, our U S pain management franchise grew 23, 1% to $49 $2 million from increasing activity in existing accounts, along with the new account adoption.
Andrew: U S. Mis revenue was $44 $6 million, reflecting single digit growth in our legacy device sales bolstered by approximately 18% growth in <unk> sales, where we are successfully laying the groundwork for long term growth.
Angie Weirich: Our spending across SG&A will continue to moderate in proportion to revenue, providing leverage and sustained improvement to profitability. With these priorities in mind, we expect full-year 2024 adjusted EBITDA to range from $26 to $29 million, translating to an adjusted loss per share of approximately $0.74 to $0.82. We also anticipate a moderate cash burn in 2024 against our strong cash balance and capital position. And as a reminder, our first quarter expense profile is typically highest. Variable compensation payouts, share vesting, and other operational needs will drive a higher overall cash burn and modest bottom line results.
Andrew: 2023 U S. Appendage management sales reached $134 5 million, a 19, 5% increase over 2022, driven largely by our <unk> Flex V device.
Andrew: And much like U S trends and activity in 2023, our international revenue growth was propelled by appendage management open ablation and pain management products.
Andrew: Gross margin for the year ended at 75, 2% an increase of 79 basis points from 2022 similar to our fourth quarter results. The increase in gross margin reflects production efficiencies realized throughout the year, partially offset by less favorable geographic and product mix.
Angie Weirich: As I turn the call back to Mike for closing comments, I would like to reiterate that 2023 was a stellar year at AtriCure. From expanding patient impact and revenue growth to realizing positive adjusted EBITDA, our results stem from the powerful collaboration of my AtriCure teammates. We enter 2024 with an unrelenting dedication to the patients we serve and a drive to continue our financial progress. Thank you, Angie.
Moving to operating expenses full year 2023, operating expenses increased 13, 3% to $327 $1 million from $288 6 million in 2022.
Andrew: Research and development costs expanded by $16 $6 million or 28, 9% on both clinical trial and product development project spend as we extend our pipeline with clinical evidence and innovation.
Angie Weirich: I would like to close by congratulating our entire team on an incredible 2023. Patient outcomes are our guiding principle, and we are most proud of that at AtriCure. Your teamwork led to over 100,000 patients treated this year and over 1 million in our company's history. We are making a difference for patients with advanced forms of AFib, higher risk of stroke, and pain after surgery.
Andrew: SG&A expenses increased $21 9 million or nine 5% with leveraging our training and education programs commercial team and infrastructure driving down operating expenses as a portion of revenue. In addition to a one time benefit in 2023 from legal settlements.
Andrew: We remain focused on continued efficiencies in SG&A, while maintaining investments in R&D for future expansion.
Angie Weirich: As we grow and evolve in the future, patient outcomes will continue to drive our efforts as we capitalize on our leadership in these markets. And with that, I will turn it over to the operator for questions. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Andrew: Full year 2023, adjusted EBITDA was positive $19 4 million compared to a negative $2 $2 million in 2022, an improvement of $21 $6 million.
Andrew: Our loss per share was <unk> 66 in 2023 compared to a loss per share of $1 <unk> in 2020 to adjust.
Michael H. Carrel: We ask that callers please limit questions to one and one follow-up at a time, and then re-cue for any additional questions. Please stand by while we compile the Q&A roster. Our first question comes from the line of Robbie Marcus with J.P. Morgan. Your line is now open.
Adjusted loss per share was <unk>, 75, and $1 <unk> respectively.
Andrew: We ended 2023 with $137 $3 million of cash and investments.
Andrew: A robust working capital position and the flexibility to fund future opportunities and investments.
Operator: Oh, great. Thanks for taking the question. Congratulations on a good quarter.
Andrew: Finally, turning to our outlook for 2024 consistent with our guidance in early January we expect to achieve between 459 and $466 million in revenue for the year, reflecting growth of 15% to 17% over full year 2023 results.
Michael H. Carrel: The clip business and Minimally Invasive had good fourth quarters and beat expectations. Just, you kind of talked about it broadly, but maybe a little more specifically how you're thinking about those two relative to open and pain as we progress. Yeah, Robbie, thanks for the comments.
Andrew: Embedded in our guidance is the assumption that product innovation and supporting clinical data will propel us to 15% growth and beyond.
Andrew: Also included in our guidance or market dynamics that include increasing competition.
Michael H. Carrel: I think, as you heard in the scripted comments, when we look at the guidance for the year, our expectation is that in the US, the growth rates of each franchise are pretty tightly coupled around the corporate average. I think, unlike what we were saying in 2023, based on kind of our expectations for the year of having some franchises outperforming and some franchises kind of falling below the corporate growth rate, given the progress within each franchise and kind of development opportunities, we would expect them to be more closely aligned around the corporate growth rate. Great And Also,
Andrew: As we look at our progress with market development and the opportunities of each franchise, we expect our franchise growth rates in the United States to align closely with our expectations of 15% to 17% annual growth.
We continue to see growth in our pain management business through deepening used in thoracic procedures and the addition of clinical data to lead to even wider acceptance of this therapy.
Andrew: We believe the exceptional adoption of our encompass clamp will continue to drive performance in open ablation, while broader progress with hybrid <unk> therapy, using our <unk> system to lift mis ablation growth in 2024.
Michael H. Carrel: I guess I have to ask, just given all the investor angst around..., your competitor Medtronic launching and your AtriClip competitor, what you're seeing so far in the field in 2024, how the sales force is reacting to it, and any feedback you have from physicians. I appreciate the second question there, Robbie. I'll handle it from a couple different angles.
Andrew: Complementing these drivers is our <unk> products, which we can which we see continuing delivery of steady growth over the large base of revenue.
Andrew: Additionally, we anticipate our international growth to remain on pace with the United States in 2024 and beyond.
Andrew: In terms of revenue cadence for the year, we expect typical seasonality to inform 2024 with first quarter revenue likely to be flat to our fourth quarter of 2023.
Michael H. Carrel: I'd say first, just a reminder that we welcome competition. We think it's actually a really good thing and validates the market. And what I mean by that is that, as we talked about, we're still less than 5% penetrated in the overall worldwide market. There are over 2 million patients that undergo cardiac surgery worldwide. Less than 5% or so actually have an Atriclip or their appendage managed today.
Andrew: From a margin perspective, we expect 2020 for gross margin to be in line with our 2023 result with potential for modest improvement from cost savings initiatives later this year.
Andrew: We anticipate headwinds from product and geographic mix as well as increasing material costs to be offset by continued production efficiencies and leveraging scale within our operations as we grow.
Andrew: And as we have said before our primary focus with capital allocation is to incubate. The next set of growth drivers for <unk>.
Michael H. Carrel: We have really big opportunities in front of us as we continue to invest in innovation. We're talking about the Flex Mini product coming out later this year, which is our eighth generation of the Atriclip product. In addition to that, we're investing in clinical evidence with the LEAPS trial to show a stroke reduction for patients that are undergoing cardiac surgery. So we're making the necessary investments on those particular fronts. We are seeing Medtronic and their clip out in the market, and we think it's great that they've actually made that kind of investment. We do see people trying it out and using the product, but we also feel very confident that we have a superior product today in the market with our Flex V product. And we feel like, with the innovation coming out with the Flex Mini and others, we're really well positioned to manage competition that comes into the market. We don't think they're gonna be the first competitor in any of our franchises.
Andrew: Therefore, we expect to maintain R&D as a percentage of revenue at roughly 19% to 20% in 2024.
Andrew: Our spending across SG&A will continue to moderate in proportion to revenue, providing leverage and sustained improvement to profitability.
Andrew: With these priorities in mind, we expect full year 2024, adjusted EBITDA to range from 26% to $29 million.
Andrew: Leading to an adjusted loss per share of approximately <unk> 74 to 82.
Andrew: We also anticipate a moderate cash burn in 2024 against our strong cash balance and capital position.
Andrew: And as a reminder, our first quarter expense profile is typically highest variable compensation payouts share vesting and other operational needs will drive a higher overall cash burn and modest modest bottom line results.
Andrew: As I turn the call back to Mike for closing comments I would like to reiterate 2023 was a stellar year at <unk> care from expanding patient impact and revenue growth to realizing positive adjusted EBITDA our results stem from the powerful collaboration of my <unk> teammates.
Michael H. Carrel: One of the things for Atricure is that we are dedicated, as I mentioned up front, to really establishing new standards of care in areas and investing in R&D on the innovation side, so new products, and continuing that. In fact, we've got seven new products coming out over the next two years, combining that with exceptional clinical evidence to demonstrate why our products work incredibly well. And then also putting efforts into our sales team and teams out in the field to specifically be the best in the world at understanding our products and understanding how they help patient care on that front. And we think that we're really well positioned across all of our product lines on that and welcome the competition and also welcome the validation of the markets that we're in. I appreciate it. Thanks a lot.
Mike: We enter 2024 with an unrelenting dedication to the patients we serve and drive to continue our financial progress.
Mike: Angie I would like to close by congratulating our entire team on an incredible 2023.
Mike: Patient outcomes are our garden, our guiding principle and we are most proud of that at <unk>.
Mike: Your teamwork led to over 100000 patients treated this year and over $1 million in our company's history.
Mike: We are making a difference for patients with advanced forms of Afib.
Mike: Higher risk of stroke and pain after surgery.
Mike: As we grow and evolve in the future patient outcomes, we will continue to drive our efforts as we capitalize on our leadership in these markets and with that I'll turn it over to the operator for questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Michael H. Carrel: Thank you. Our next question comes from the line of Danielle Antalffy with UBS. Your line is now open. Danielle, your line is open. Please check your mute button.
Speaker Change: To withdraw your question. Please press star one again.
Operator: Hey everyone, can you hear me? This is Simon on for Danielle. We can hear you. We can hear you, Kevin. Hey guys, thanks for taking the question. This is Simon Nagan.
Speaker Change: We ask that callers please limit questions to one and one follow up at a time and then re queue for any additional questions.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Robbie Marcus with Jpmorgan. Your line is now open.
Michael H. Carrel: Your cryo segments really demonstrated great growth over the past several years, but it's naturally moderated just given the scale. Do you think mid-teens growth in this segment is sustainable? And what are the puts and takes to really think about moving forward here? Yeah, appreciate the question. You stated it very well.
Robert Marcus: Oh, great. Thanks for taking my question and congrats on a good quarter.
Robert Marcus: I wanted to start on.
Robert Marcus: The clip business and.
The minimally invasive had good fourth quarters beat expectations.
Robert Marcus: Just.
Michael H. Carrel: It's obviously gotten to the size and scale of a $50 million business that grew 26% this year. We do think that those mid-teen plus growth rates are absolutely sustainable, not only in the thoracic region. So if you look at just the thoracic market, we're less than 20% penetrated today. So we still have a long way to go. And as I mentioned in my comments, we're investing in clinical evidence to demonstrate both the economic and clinical value around that to hopefully push those numbers up even more over the coming years. You top that off with us investing, much as I talked about, in all of our product lines. We've got the cryosphere plus that just came out this year, and we've got a new product coming out later this year that is an advancement on top of that, that is hopefully going to reduce the time that they need to actually do their ablation, which hopefully will also open up the sternotomy market a little more aggressively than it has, because that's been a pushback in that market.
Robert Marcus: You kind of talked about it broadly, but maybe a little more specifically how youre thinking about those two relative to open in pain as we progress into 'twenty four.
Speaker Change: Yes, Robbie thanks for the comments I think as you heard in the scripted comments when we look at the guidance for the year. Our expectation is that in the U S. The growth rates of each franchise are pretty tightly coupled around the corporate average I think unlike what we were saying in 2023 based on kind of our expectations of the.
Speaker Change: A year of having some franchises as outperforming and some franchises kind of falling below the corporate growth rate given the progress within each franchise and kind of development opportunities would expect them to be more closely aligned around the corporate growth rate.
Speaker Change: Great and.
Robert Marcus: I guess I have to ask just given all the investor angst around.
Michael H. Carrel: So thoracotomies alone, less than 20% penetrated, we're coming up with new products that reduce time that will hopefully enable and actually get us into the sternotomy market a little bit more aggressively as you look in future years. And so we feel like we're in a really good position relative to the growth there. And the final thing I'll add is, as we talked about, or you heard in my comments as well, there are other areas, extremities in particular, that could also benefit from the cryo ablation that we use. And we're in the process of actually looking at that, evaluating it, and studying it. We're not ready to announce anything yet, but over the next couple years, I do believe it will be getting into other areas outside of just thoracic and sternotomy, which have a lot of room for growth already. That's a good way, that's a long way of saying, yes, we feel comfortable with the kind of mid-teen growth being in that range for a long time. That's really helpful. Thank you guys. I have one quick one for you.
Robert Marcus: Your competitor Medtronic launching in April Cliff.
Robert Marcus: Competitor, what youre seeing so far in the field.
Robert Marcus: In 2024, so far how the sales force is reacting to it and any feedback you have from physicians. Thanks a lot.
Speaker Change: I appreciate the second question there Ravi.
Ravi: Handle it from a couple of different angles is a first is just a reminder, we welcome competition. We think it's actually a really good thing and validates the market.
Ravi: And what I mean by that is that there as we talked about we're still less than 5% penetrated. The overall worldwide market. There are over 2 million patients that undergo cardiac surgery worldwide less than 5% or so actually have an <unk> or their appendage managed it today.
Ravi: We have really big opportunities in front of us as we continue to invest in innovation, we're talking about the flex many product coming out later on this year, which is our eighth generation of the <unk> product. In addition to that we're investing in clinical evidence with the leaps trial to show a stroke reduction for patients that are undergoing cardiac surgery.
Michael H. Carrel: You mentioned potentially launching a product in the ISP segment this year. Is that still on target? And any details on that would be incredibly helpful.
Michael H. Carrel: Yeah, so a reminder for people, because we didn't really go into detail on today's call. We're running a trial called HEAL-IST for patients with inappropriate sinus tachycardia. What that represents are people that have elevated heart rates while they're resting, typically above 90 consistently. Most of these patients are in the mid-100s, and it tends to affect women kind of in their 20s to 40s or
Ravi: So we're making the necessary investments on those particular fronts, we are seeing medtronic and their clip out in the market.
Ravi: And we think it's great that they are actually made that kind of investment we do see people trialing it out and using the product.
Ravi: But we also feel very confident that we have a superior product today in the market with our flex V product and we feel like with the innovation, we're coming out of the flex many others, we're really well positioned to manage competition that comes into the market. We don't think theyre going to be the first competitor in any of our franchises one of the things for <unk>.
Michael H. Carrel: It's a very large patient population, well over a million patients that actually represent this market. There were some, an EP and a surgeon out of Belgium kind of invented a procedure that you could leverage using our technology in combination with the mapping and the work done by the electrophysiologist to basically reduce that. And they showed almost 100% improvement at both a 6-month and 1-year timeframe after the procedure. The existing products that we have work incredibly well. It's under investigation for this particular disease in the United States right now, and we're making great progress on enrollment there. And yes, we are developing a new product because right now our product today works incredibly well, but it takes a little while to actually get access to what you need to do there. And so the new product is custom built very specifically for IST and for this specific surgery, and we do anticipate late this year or early next year to kind of have that product on the market. Thanks so much.
Ravi: We are dedicated as I mentioned upfront to really establishing new standards of care in areas and putting investments in R&D on both the innovation side, some new products and continuing that in fact, we've got seven new products coming out over the next two years, combining that with exceptional clinical evidence to demonstrate why are.
Ravi: Our products work incredibly well and then also putting efforts around our sales team and teams out in the field to specifically be the best in the world at understanding our products and understanding how they help patient care on that front and we think that we're really well positioned across all of our product lines on that and welcome the competition and also welcomed the validation.
Ravi: The markets that we're in.
Speaker Change: I appreciate it thanks a lot.
Speaker Change: Thank you. Our next question comes from the line of Danielle <unk> with UBS. Your line is now open.
Danielle: Daniel Your line is open please check your mute button.
Speaker Change: Hi, everyone can you hear me this is Simon on for Danielle.
Simon: We can hear you speaking here seven.
Simon: Hey, guys. Thanks for taking the question. This is Simon again.
Simon: You are correct the segments really demonstrated great growth over the past several years.
Michael H. Carrel: Thank you. Our next question comes from the line of Bill Plovonic with Kenna Cord. Your line is now open.
Simon: Naturally moderated just given the scale.
Michael H. Carrel: Hi Mike and Angie, it's Sean on for both, and I thank you for taking our questions. And congrats on a strong Q4, too. Maybe just starting on Encompass, you know, you said that about 50% of U.S. revenues are from the clamp now. Can you talk about what hurdles still exist to gain the remaining users to shift the new device? Is this just contract timing or price sensitivity?
Simon: Do you think mid teens growth in the segment is sustainable.
Simon: What are the puts and takes there really think about moving forward here.
Speaker Change: Yes, I appreciate the question.
Speaker Change: You stated it very well, it's obviously gotten to the size and scale of $50 million business that grew 26%. This year. We do think that those mid teen plus growth rates are absolutely sustainable not only in thoracic. So if you look at just the thoracic market with less than 20% penetrated today. So we have a long way to go and as I mentioned in my comments.
Michael H. Carrel: And do you plan on eventually stopping selling the older versions of the clamp? Thanks. I'll start with the last. We don't anticipate stopping selling any of our old clams. They're actually exceptional.
Speaker Change: We're investing in clinical evidence to demonstrate both the economic and clinical value around that to hopefully push those numbers up even more over the coming years, you top that off with us investing in much like I talked about about all of our product lines. We've got the cryo sphere plus that just came out this year, we've got a new product coming out later on this year that is an advancement on top of that.
Michael H. Carrel: We continue to get really good feedback on that. They work incredibly well. They're really geared towards specific surgeons who are doing the full Cox maze. They're the ones that we studied under PMA. For Encompass, quite frankly, it's just going to take time to educate people how to use the product and get people comfortable with that. We're expanding into new sites. We're in about 55 to 60% of the sites in the U.S., so we've got a lot of room for growth relative to that. We're also planning to do a clinical trial as well, very specifically, much like we did for the Ablate trial, which was what got us the PMA approval for our original clams.
Speaker Change: That are hopefully going to reduce the time that they need to actually do their ablation, which hopefully will also open up the sternotomy market a little more aggressively than it has but thats been a pushback in that market. So thoracotomy alone less than 20% penetrated we're coming out new products that reduce time that will hopefully enable and actually get us into the sternotomy market a little bit more aggressively as you're looking at.
Future years and.
Speaker Change: So we feel like we're in a really good position relative to the growth there and the final thing I'll add is when we talked about or you heard in my comments as well there are other areas extremities in particular that could also benefit from.
Speaker Change: The cryo ablation that we use and we are in the process of actually looking at that are evaluating it and studying it we're not ready to announce anything yet but over the next couple of years I do believe that we'll be announcing getting into other areas outside of just thoracic and sternotomy, which have a lot of room for growth already so.
Michael H. Carrel: We will anticipate doing that. We think that with that additional clinical evidence, it could also have an impact on adoption over time. This isn't one of those ones that is just going to grow overnight, but it's accelerated our growth rate. If you would have asked anybody if our open business could grow above the low double digits, the 9, 10, 11% that we were growing for many, many years, this combined with reimbursement changes that have happened over the last couple of years has really accelerated adoption and more ablations that have happened. I feel really good about the progress. It's much better than we ever expected. We'll continue to talk about it out in the field from that standpoint. Great, thanks, Mike.
That's a good that's a long way of answering yes, we feel comfortable with the kind of mid teens growth being in that range for a long time.
Speaker Change: That's really helpful. Thank you guys one quick one for you Keith.
Speaker Change: You mentioned potentially launching a product in the ISP segment this year.
That still on target.
Speaker Change: That would be incredibly helpful.
Keith: So a reminder for people because we didn't really go into detail on today's call. We're running a trial called <unk> for patients with inappropriate sinus tachycardia, what that represents our people that have elevated heart rates, while they're at while the resting typically above 90 consistently most of these patients are in the mid one hundreds and a 10.
Keith: To affect women kind of in there, 20% to 40% or so.
Keith: It's a very large patient population well over 1 million patients that actually represent this market. There were some an EP and a surgeon out of Belgium kind of invented a procedure in which you could leverage using our technology in combination with the mapping and the work done by the Electrophysiologist to basically reduce that and they showed almost.
Michael H. Carrel: And then just on pain management, too, to kind of circle back to some of the other comments, you know, how should we think about the timing of the economic outcome data that you've mentioned? Is that going to move the needle in 2024 or beyond? And are you still considering gathering data to support an opioid reduction label? Thanks. Yeah, I don't know that I would say that it's going to be a 2024 event relative to that data.
Keith: 100% improvement at both the six in one year six months and one year timeframe after the procedure.
The existing products that we have worked incredibly well it's under investigation for this particular disease in the United States right now and we're making great progress on enrollment there Andy.
Michael H. Carrel: It's going to be a cumulative aspect of the data for Crown and Nerve Block and not one definitive trial. We're actually supporting many trials that are multi-center across the country and in Europe. The purpose of that is that the totality of all that evidence, we think, is what's going to actually change practice. That's going to take several years.
Andy: And yes, we are developing a new product because right now our product today works incredibly well, but it takes a little while to actually get access to what you need to do there and so the new product is custom built very specifically for ISP and for this specific surgery and we do anticipate late this year early next year to kind of have that product in the market.
Speaker Change: Thanks, so much.
Speaker Change: Thank you. Our next question comes from the line of Bill <unk> with Canaccord. Your line is now open.
Speaker Change: Hi, Mike and Andy It's Sean on for Bill Tonight, Thanks for taking our questions.
Michael H. Carrel: But I think more and more papers are coming out every year. We had 14 trials that we were supporting or so last year. That number is going to continue into this year. Many of those are looking at opioid reduction as part of what they're looking at overall as the outcome.
Speaker Change: And congrats on a strong Q4 two.
Speaker Change: Maybe just starting on a comp.
Sean: You said that about 50% of U S revenue from the clients now can you just talk about what hurdles still exist.
Michael H. Carrel: And so I do believe that that is something that's very important for people to track and to know. And I think more and more papers are going to be written about the fact that people that do use this product tend to have a lower use of opioids once they leave the hospital. Great, thanks again.
Sean: Meaning users shift that new device basis, just contract timing or price sensitivity and you plan on eventually stop selling the older versions of the cramps.
Sean: I'll start with the last we don't anticipate stopping selling any of our old clamps on there actually exceptional we continue to do.
We get really good feedback on that they work incredibly well that are really geared towards specific surgeons who are.
Michael H. Carrel: Thank you. Our next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is now open.
Sean: During the full Cox maze for the ones that we studied in our PMA for encompass.
Operator: Afternoon. Thanks for taking that question. So I don't know if this is for Mike or Angie, but I think Angie mentioned that you're factoring in some competitive pressure here in 24 into your guide. You've grown 20% the last two years on the top line. You're guiding 16% of the midpoint, so about 400 basis points.
Sean: Quite frankly, it's just going to take time to educate people how to use the product to get people comfortable with that.
Sean: We're expanding into new sites were in about 55% to 60% of the sites in the U S. So we've got a lot of room for growth relative to that we're also planning to do a clinical trial as well very specifically a much like we did for the <unk>.
Sean: <unk> trial, which was what got us the PMA approval for.
Our original plans that we will anticipate doing that we think that with that additional clinical evidence that could also have an impact on adoption over time.
Angie Weirich: That's around $16 million of potential competition you're factoring in, or I don't know if it's large numbers, whatever it may be. Is that the right way to characterize the amount of pressure that you're anticipating? Is it only in the clip business? And then, if I do the math on it, it would seem like you're kind of incorporating around 10%, maybe a little bit north of that share loss.
This isn't one of those ones that it's just going to grow overnight, but it's it's accelerated our growth rate. If you would've asked I think anybody if our open business could grow kind of above the low double digits kind of the 910, 11% that we are growing for many many years.
Sean: This combined with reimbursement changes that have happened over the last couple of years of really accelerated adoption and more oblations that have happened. So I think I feel really good about the progress is much better than we ever expected.
Sean: We will continue to kind of talk about it out in the field from that standpoint.
Speaker Change: Great. Thanks, Mike and then just on pain management Q2 kind of circle back to some of the other comments how.
Angie Weirich: Is that the right way to characterize it? Yeah, Matt, based on, you know, years here that we start the year and we want to make sure that we're putting out a guide that we feel really good about executing against that gives us positions as well to kind of beat and raise as we go throughout the year. The range does consider both the growth drivers in our business as well as the potential competition in our market. But I think, you know, to that point, we are working in markets that are very, very underpenetrated, and we believe that there's still significant growth potential, even with competitive pressure. So, long winded way of saying it's not, you know, 10 points of or, you know, that kind of loss relative to Medtronic share.
Speaker Change: How should we think about the timing of the economic outcome data that you've mentioned should is that going to move the needle to needle in 2024 and beyond and are you still considering gathering data to support an opioid reduction label. Thanks.
Mike: Yes, I don't know that I would say that it's going to be a 2024 events relative to that data, it's going to be a cumulative aspect of the data for cryo nerve block and not one definitive trial, we're actually supporting many.
Mike: Trials that are multicenter across the country and over in Europe. The purpose of that is the totality of all of that evidence. We think is what's going to actually change practice, that's going to take several years to kind of do it but I think more and more papers are coming out every year. We had 14 trials that we're supporting or so last year that number is going to continue into this year.
Mike: Many of those are looking at opioid reduction as part of.
Angie Weirich: More importantly, I think what informed our guide through 2024 is just the strength of our portfolio and the momentum that we're seeing as we exit 2023 and start a new year in 2024. But we want to make sure that we guide to numbers that we can execute strongly against. That's been our philosophy for years and continues to be as we start the new year. And specifically, I know there's a lot of trialing going on. Have you seen people flipping over to Penditure and using it in a lot more cases, or are you still seeing a dynamic where they maybe trial it, and they just say, you know what? I don't like this for the most part. I'm sure there are some people that'll flip, but what are you seeing specifically there?
Mike: What they're looking at overall is the outcome and so I do believe that that is something that's very important for people to track and to know and I think more and more papers are going to be written about the fact that people that do use this product tend to have a.
Mike: Lower use of opioids once they leave the hospital.
Mike: Yes.
Speaker Change: Great. Thanks again.
Speaker Change: Thank you. Our next question comes from the line of Matthew O'brien with Piper Sandler. Your line is now open.
Matthew O'brien: Afternoon. Thanks for taking my question. So I don't know if this is for micro <unk> EBIT, but I think Andy you mentioned that you're factoring in some competitive pressure here in 'twenty four into your guide you've grown 20% the last two years on the topline.
Speaker Change: Adding 60% at the midpoint, so about 400 basis points.
It's around $16 million.
Angie Weirich: And I do have one more follow-up. I mean, we're definitely seeing people trial it across the country, but we feel really good about the strength of our franchise out there, Matt, and feel like people really love the AtriClip. It's set a very high bar in terms of how well it works.
Speaker Change: I think of potential competition, you're factoring into runoff with law of large numbers or whatever it may be.
Speaker Change: Is that the right way to characterize the amount of pressure that youre anticipating is it only in the clip business and then if I do the math on it it would seem like youre kind of incorporating in around 10%, maybe a little bit north of that share loss is that the right way to characterize it.
Angie Weirich: People understand that we have a tremendous amount of clinical evidence and data behind it, not just on the closure in particular, showing exceptional closure and an exceptional safety profile with that device. And so we feel like we're in a great position, even though people are trying it at various different places throughout the country. Got it, OK.
Speaker Change: Yes, Matt I think you know based on years here that we start the year and we want to make sure that we're putting out a guy that we felt really good about executing against that gives us positions us well to kind of beat and raise as we go throughout the year.
Angie Weirich: And then on the open business, it looks like it accelerated to Q4 on a two-year stack basis, but it was a little bit softer than I might've thought on a quarter of a quarter basis. So just curious what you're seeing there in terms of adoption, and expectations for growth there. Is it still another mid-teens?
Speaker Change: The range does consider both the growth drivers in our business as well as the potential competition in our market, but I think to that point. We are working in markets that are very very underpenetrated and that we believe that there is still significant growth potential.
Speaker Change: Even with competitive pressure, so long winded way of saying it is not.
Angie Weirich: I don't know if the guidelines can help a little bit as well. And then, just any thoughts on competition? I know there's somebody that's applied to compete with you.
Speaker Change: 10 points of that.
Speaker Change: That kind of loss relative to Medtronic share more importantly, I think what informed our guide through 2024 is just the strength of our portfolio and the momentum that we're seeing as we exit 2023 and start our new year end 2024, but want to make sure that we guide to numbers that we can execute strongly against thats been our philosophy for years and continues to be easily.
Angie Weirich: Is that something that you're building in a little bit this year or something that potentially could impact that business as we go? As Angie mentioned in the guidance, pretty much all of our businesses, we think, are around that 15 to 17%. I mean, pun intended, they're all converging around that particular area.
Speaker Change: The new year.
Speaker Change: Okay, and just specifically I know theres a lot of traveling going on have you seen people flipping over to <unk> and using.
Angie Weirich: And so we feel like, obviously, there's upside potential in every one of our businesses, to your point, Matt. We're seeing great growth there. I think that to be able to continue to grow on the kind of baseline numbers that we've got at that kind of rate in cardiac surgery the way we are, we feel really good about it. But we anticipate that being kind of in that 15 to 17%, pretty much all of our franchises across that from that standpoint. And we're always looking at competition. I mean, there's nothing specific to comment on at this point.
Speaker Change: Using it a lot more cases or are you still seeing a dynamic where.
Speaker Change: Maybe try let me just say you know what I don't like this for the most part I'm sure. There are some people that will flip it.
Speaker Change: What are you seeing specifically there and I think you have a more follow up.
Speaker Change: I mean, we're definitely seeing people trial at <unk>.
Speaker Change: Across the country, but we feel really good about the strength of our franchise out there, Matt and feel like people really love the age group. It set a very high bar in terms of how well. It works people understand that we have a tremendous amount of clinical evidence and data behind it.
Speaker Change: On the closure in particular.
Speaker Change: Exceptional closer an exceptional safety profile with that device and so we feel like we're in a great position, even though people are trying it at various different places throughout the country.
Angie Weirich: And if competition does come in, I think that we will obviously address it. But we feel really comfortable with the guidance that we've given and that, as Angie mentioned, we try to take a really conservative look at it at the beginning of the year to ensure that we can make sure that we can meet and beat it throughout the year. Thank you. Our next question comes from the line of Marie Thibault with BTIG. Your line is now open. Hey Mike. Hey, Angie. You've got Sam Iveron from Marie.
Matt: Got it Okay, and then on the open business it looks like it accelerated in Q4 on a two year stack basis, but it was a little bit softer than I might have thought on a on a quarter over quarter basis. So just curious what youre seeing there in terms of adoption.
Matt: Expectations for growth there is still another mid teens I don't know if the guidelines can help a little bit.
Michael H. Carrel: Thanks for taking the questions and congrats on a nice finish to the year. Maybe I can start on Converge and just look at the U.S. business growing for the MIS business growing 16% sequentially, 30% year-over-year. It does sound like, you know, things are really starting to click there.
Matt: As well and then just any thoughts on competition I know there is somebody thats filed to compete with you is that something that youre building in a little bit this year, something that potentially could impact that business as we head into 2020. Thanks.
Matt: As Andrew mentioned on the guidance pretty much all of our businesses, we think being around that 15% to 17%.
Michael H. Carrel: And I know you addressed some of that in your prepared remarks, but any more color you can give on any specifics, and maybe, you know, does that give you the confidence now to push a little bit harder on new site activation this year? Yes, Sam, I think we feel really good about the activity in the fourth quarter. I think this is reflective of, you know, a year plus of our team in the field, supported by many others in the business, really trying to hone in on where programs had a really good interest in starting a convergence program, and why they've not been able to accelerate and see the kind of growth that we would expect. So we feel really good that the activities are paying off and that we're making a difference in the accounts that we're focusing on.
Matt: Two a pun intended they're all converging around that particular area.
Matt: So we feel like obviously theres upside potential and every one of our businesses to your point Matt.
Seeing great growth, there I think that to be able to continue to grow in the kind of baseline numbers that we've got at that kind of rate in cardiac surgery. The way. We are we feel really good about it but we anticipate that being kind of in that 15% to 17% pretty much all of our franchises across that from that standpoint, and we're always looking at competition I mean, there's no nothing specific to comment on at this point.
Speaker Change: If competition does come in I think that we will obviously address it but we feel really comfortable with the guidance that we've given and net as Angie mentioned, we try to take a really.
Speaker Change: A conservative look at at the beginning of year to ensure that we can make sure that we can meet and beat it throughout the year.
Angie Weirich: I'd say longer term, when you think through 2024, we're looking for that to be more broadly replicated throughout the base of accounts so that we can continue these kinds of growth rates. But I would say the efforts in the field are really what we're seeing are starting to pay off, and we look for that to have a broader impact in 2024. I think the second part of your question was new account activations. We did see a couple of new account activations in 2023.
Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Marie Thibault with <unk>. Your line is now open.
Marie Thibault: Hey, Mike Hey, Angie you got Sam Hi, Brian Murray and thanks for taking the questions and congrats on a nice finish to the year.
Marie Thibault: Maybe I can start on converge and just looking at the U S business growing.
Marie Thibault: The mis business growing 16% sequentially, 30% year over year.
Speaker Change: It does sound like things are really starting to click there and I know you addressed some of it in your prepared remarks, but any more color you can give on on any specifics.
Angie Weirich: I'd say the focus of our team at this point in time is on existing accounts, I think, as they operate throughout 2024. There's still a lot of interest from customers. They are still very underpenetrated in terms of the universe of accounts that could have converged procedures or converged programs and are still training new accounts.
Speaker Change: Does that give you the confidence now to touch a little bit harder on new site activation this year.
Speaker Change #100: Yes, Sam I think the we feel really good about the activity in the fourth quarter. I think this is reflective of a year plus of our team in the field supported by many others in the business really trying to hone in on where.
Sam: We're programs had a really good interest in starting a converged program why they've not been able to accelerate and see the kind of growth that we would expect so we feel really good that the activities are paying off and that we're making a difference in the accounts that we're focusing in on I'd say longer term. When you think through 2024, we're looking for that to be more.
Angie Weirich: And I think the work that we're doing today to help existing accounts be more efficient and think about building their programs, I think, long term, will help us initiate new accounts and have them scale quickly. Really helpful, Andy. Thanks for the added color there.
Sam: Broadly replicated throughout the base of accounts. So that we can continue these kinds of growth rates, but I would say the efforts in the field are really what we're seeing is starting to pay off and looking for that to have a broader impact in 2024.
Angie Weirich: Maybe just flipping to HRCLP and maybe looking beyond maybe some of the competitive dynamics. But, you know, you also mentioned some guideline changes. And I'm just wondering if that can be, maybe, an additional tailwind to the underlying market and adoption for the CLIP business. Thanks for taking the question. Yeah, absolutely. We think that the guidelines are pretty monumental for the entire space, and they're basically saying that a class 1A recommendation is basically saying you should treat this appendage every single time somebody has atrial fibrillation today. And that is not just the cardiac surgeons doing it, but ACC and AHA are basically saying everybody needs to treat the appendage when they're undergoing cardiac surgery.
Sam: And it really execute the second part of your question was new account activation. So we did see a couple of new account Activations in 2023, I would say the focus of our team at this point in time is on existing accounts I think as they operate throughout 2024, there's still a lot of interest from.
Sam: Some customers are still we're very underpenetrated in terms of the universe of accounts that could have converged procedures are converged programs.
Sam: R&R still training new accounts and I think the work that we're doing today to help existing accounts be more efficient and think about that on your programs. I think long term will help us initiate new accounts and have them scale quickly.
Speaker Change #101: Really helpful. Andrew Thanks for the added color there.
Michael H. Carrel: And so absolutely, we think that's a really good sign for this market overall. And obviously, AtriClip is being used to manage the appendage by many people around the globe. So it's a great validation, just like competition is a great validation of the space and what we're doing there. And then, obviously, we're expanding that market with LEAPS so that, eventually, the data we get with that changes the guidelines for every patient, not just those that have AFib. That's our goal with that. That's why we're investigating it.
Maybe just flipping to age of equipment and maybe looking beyond maybe some of the competitive dynamics, but you also mentioned some guideline changes and I'm just wondering if that can be.
Speaker Change #102: An additional tailwind to the underlying market and adoption for <unk> for.
Speaker Change #103: And for the club business, Thanks for taking the questions.
Yeah, absolutely, we think that the guidelines are pretty monumental for the entire space.
Basically, saying a class one recommendation.
Speaker Change #103: You should treat this appendage every single time somebody has atrial fibrillation today.
Speaker Change #104: And that is not just the cardiac surgeons doing it but at ACC and AAJ to the referring cardiology community is basically sending everybody needs to treat the appendage when they're undergoing cardiac surgery and so absolutely we think thats a really good sign for this market overall, and obviously <unk> is being used to manage the appendage by many people around the globe. So.
Michael H. Carrel: And you can see the excitement with 1,700 patients already enrolled in a 6,500 person trial. It's pretty remarkable to see that kind of growth. That's the excitement people have and the belief in managing the appendage.
Speaker Change #104: Its a great validation just like competition is great validation of the space and what we're doing there and then obviously, we're expanding that market with Leafs. So that eventually the day, we get with that changes the guidelines for every patient not just those that have afib. That's our goal with that that's why we're investigating it.
Michael H. Carrel: Thanks again for taking the question. Thank you. Our next question comes from the line of Joseph Conway with Needham. Your line is now open. Hi, Mike. Hi, Angie.
Angie Weirich: Cheers to us. On for Mike. I guess maybe just touching on gross margin improvement in the quarter, I think Angie called out some production efficiencies, and looking into 2024, I think in the comments, you guys talked about just being in line for 2024, potential modest improvement. I was just wondering if you could maybe give some more color around what happened in this quarter and some of those cost-saving initiatives that you expect to roll out this year and how you expect that to be phased. Yeah, so what you saw in the fourth quarter, really strong, I'd say production efficiencies, offsetting, we had quite a few headwinds coming from the mix of our international business. That led to an improvement off of 2020, 2022, the fourth quarter comp.
Speaker Change #104: And you can see the excitement with 1700 patients already enrolled out of a 6500.
Speaker Change #104: Person trial, it's pretty remarkable to see that kind of growth thats, the excitement people have and the belief and managing the appendage.
Speaker Change #105: So thanks again for taking the questions.
Speaker Change #105: Thank you. Our next question comes from the line of Joseph <unk> with Needham. Your line is now open.
Joseph: Hi, Mike.
Joseph: Joseph.
Joseph: <unk> on for Mike.
Joseph: I guess, maybe just touching on <unk>.
Joseph: Gross margin improvement in the quarter I think Andrew you called out some production efficiencies.
Joseph: Looking into 2024.
Joseph: I think in the comments you guys talked about just being in line for 2024 potential modest improvement.
I was just wondering if you could maybe give some more color around what happened in this quarter and some of those cost saving initiatives that you expect to rollout.
Angie Weirich: And as we enter into 2024, I'd say, kind of more of the same; you're going to see nice improvements. If the only thing that we saw was improvements to kind of production efficiencies with the same kind of mix of revenue, you'd see some nice improvements in 2024. But we are expecting some headwinds given the mix anticipation in 2024.
Joseph: This year, how you expect that to be phased.
Speaker Change #106: Yes, so what you saw in the fourth quarter really strong I'd say production efficiencies offsetting we had quite a few headwinds coming from the mix of our international business.
Speaker Change #106: That led to an improvement off of 2000 22020 to the fourth quarter comp and as we enter into 2024, I'd say kind of more of the same youre going to see nice improvements if the only thing that we saw was improvements too and our production efficiencies with the same kind of mix of revenue you'd see some nice improvements in 2024, but we.
Angie Weirich: We've talked about in the past a couple of areas where we expect to see some improvements in margin. The first would be with the launch of the cryosphere plus probe. To the extent that the adoption of that probe takes off in comparison, you know, or replaces our existing cryosphere probe, there is a nice benefit to our gross margin. Again, our launch is anticipated in the second quarter. So you will see more of that benefit in the second half of the year. And then the other thing we've talked about on other calls is the Encompass clamp. Our team, our operations team, and engineering team did really nice work throughout 2023 to say, given the demand that we're seeing for this particular product line, what are some ways that we can produce this product better and more efficiently, but also come with some cost savings that we would anticipate later in 2024. So I think a big driver in 2024 when you think about gross margin is primarily mixed, but knowing that there's some fundamental production efficiencies and some nice things happening within our operations that will help be a tailwind to the overall number. Okay, thank you, that's very helpful.
Speaker Change #106: We're expecting some headwinds given the mix anticipation in 2024, we've talked about in the past a couple of areas, where we expect to see some improvements to margin. The first would be with the launch of the cryo sphere, plus probe to the extent that the adoption of that probe takes off in comparison, our replaces our existing cryo sphere.
Speaker Change #106: There is a nice benefit to our gross margin again, our launches anticipated in the second quarter. So you would see more of that benefit in the second half of the year and then the other thing we've talked about on other calls as the encompass clamp our team our operations team and engineering team did really nice work throughout 2023 to say given the demand that we're seeing in this particular.
Speaker Change #106: <unk> line, what are some ways that we can produce this product better and more efficiently, but also come with some cost savings that we would anticipate later in 2024. So I think the big driver in 2024. When you think about gross margin is primarily mix, but knowing that there is some fundamental production efficiencies and some nice things happening within our operations that are.
Speaker Change #106: That help be a tailwind to the overall number.
Speaker Change #107: Okay. Thank you.
Angie Weirich: And then I guess just a quick one on the new AtriClip product. You gave some commentary around timing for the launch, but just maybe if you could talk about pricing, what you guys are thinking about that, especially with Medtron coming into the market, if there's anything that, you know, you're trying to hold back any price increases for that. Yeah, so first of all, I'll comment on the product. It's called the Flex Mini. We did file for $510K.
Speaker Change #108: Very helpful.
Speaker Change #109: And then I guess, just a quick one on the new <unk> product.
Speaker Change #109: You gave some some commentary around around Dubai are on timing for the launch but.
Speaker Change #109: Maybe if you could talk about pricing what you guys are thinking about that.
Speaker Change #109: Especially with Medtronic coming into the market.
Speaker Change #109: If theres anything that youre trying to hold back any price increases for that.
Speaker Change #110: Yeah. So first of all I'll comment on the product that is called the flex many we.
Speaker Change #110: We did file for a 500 10-K.
Michael H. Carrel: And we feel like this product is going to be incredibly well received. It's about a third the profile and size of our product, Flex, the product on the market today. It's incredibly easy to deploy.
And we feel like this product is going to be incredibly well received it's about a third the profile and size of our product our flex the product on the market today is incredibly easy to deploy all the testing that we've seen so far is that it is going to be by far and away. The most superior product on the market going forward, we have not.
Michael H. Carrel: All the testing that we've seen so far is that it is going to be, by far and away, the most superior product on the market going forward. We have not determined our pricing strategy at this point, and so we'll probably hold back in terms of discussing that in any kind of detail.
Speaker Change #110: And our pricing strategy at this point and so we'll probably hold back in terms of discussing that in any kind of detail.
Michael H. Carrel: But we're evaluating what the best pricing strategy is right now. Okay, great. Thanks so much and congrats on that great quarter.
Speaker Change #110: But we're evaluating what the best pricing strategy is right now.
Speaker Change #111: Okay, great. Thanks, so much and congrats on a great quarter.
Michael H. Carrel: Thanks. Thank you. Our next question comes from the line of Danny Stotter with Citizens GMP. Your line is now open. Great, thanks. Can you hear me?
Thanks.
Stanley Starter: Thank you. Our next question comes from the line of Stanley start starter with citizens JMP. Your line is now open.
Great. Thanks can you hear me.
Michael H. Carrel: We can hear you. Great. So, first off, I just wanted to ask broadly about procedure volume. So, you know, we've heard some of your peers comment on elevated volume levels and just wanted to get your take on that.
Stanley Starter: Okay.
Stanley Starter: We can hear you.
Stanley Starter: Great.
First of all just wanted to ask broadly about procedure volumes.
Stanley Starter: Just we've heard from some of your peers Ramadan elevated volume levels and I just wanted to get your color on that and particularly as it relates to the open surgical market.
Michael H. Carrel: And particularly as it relates to the open surgical market, you know, have you seen any notable changes in valve or cabbage procedures that have, you know, led to some of the growth in open ablation and your open atrial clip procedures? Thanks. Yeah, I don't know that we've seen any kind of dramatic improvement. There's been steady improvement since COVID, but I think we're in a good normalized period now where, typically, you'll see cardiac surgery going in that kind of one to two percent per year. And I don't think we've seen anything different than that over the course of the last year or so.
Stanley Starter: <unk> seen any notable change in valve or cabot's procedures.
Stanley Starter: Led to some of the growth in open ablation.
Speaker Change #113: Youre open.
Procedures.
Speaker Change #114: Yes, I don't know that we've seen any kind of dramatic improvement there's been steady improvement since COVID-19, but I think we're in a good normalized period now where typically youll see cardiac surgery are growing in the kind of 1% to 2% per year and I don't I don't think we've seen anything different than that over.
Speaker Change #114: Over the course of the last year or so I've heard different reports that that might change and you might start to see some improved.
Michael H. Carrel: I've heard different reports that that might change, and you might start to see some improved growth across the procedure in 2024 from some places. I know HCA talked about it on one of their calls in terms of their cardiac surgery volumes, but I don't know that I've heard that across every single every single system.
Speaker Change #114: Growth across the procedure in 2024 from some places I know HCA talked about it on one of their calls in terms of their cardiac surgery volumes I don't know that ive heard that across every single every single system. So I guess.
Michael H. Carrel: So I guess I'd say right now I'm cautiously optimistic about that. Great, thank you. And then this one follow-up, turn to Appendage Management. The growth in MIS ablation was great to see, but with that, are you seeing an uptick in your atrioclip minimally invasive procedure? procedures, and then could you remind us where the AtriClip makes us open to MIS today, and how that has changed over the past year or so, and where you think that could go in 2024? Thank you. That was a nice byproduct of the strength of our MIS business in the fourth quarter. We saw an uptick in our MIS appendage management products, the AtriClip Pro products, realizing pretty equal growth to the open AtriClip products, leading to about 22% growth in the fourth quarter in the U.S. Attachment rates, we continue to see a steady increase in attachment. A year or so ago, we were talking about around a 75% attachment to our converged procedure, and now we're, I'd say, kind of in the mid-80s at this point in time and continue to receive really good, strong feedback from accounts that are starting converged programs or have adopted converged programs about the interest in treating the appendage surgically during the converged procedure.
Speaker Change #114: I'd say right now im cautiously optimistic on that one.
Great. Thank you and then just one follow up.
Speaker Change #114: Appendage management.
Speaker Change #114: The growth in Mif's ablation was great to see but with that are you seeing an uptick in some of our eight year clip.
Speaker Change #114: Minimally invasive.
Speaker Change #114: Procedures, and then could you remind us where that each equipped mix of open.
MS sit today, and how has that changed over the past year or so and where you think that could go in 2020 quarter. Thank you.
Speaker Change #114: That was a that was a nice byproduct of the strength of our MS business in the fourth quarter, we saw an uptick in our mis appendage management, the <unk> pro products.
Speaker Change #114: Realizing pretty equal growth to the open clip products, leading to about 22% growth for the fourth quarter in the U S.
Speaker Change #114: And our attachment rates, we continue to see a steady increase in attachment a year or so ago, we were talking about around a 75% attachment to our converge procedure and now are I'd say kind of mid <unk> at this point in time and continue to receive really good strong feedback from accounts that are starting converged program or have adopted converge programs the interest in <unk>.
Treating the appendage surgically during the converge procedure as we exited the year that when you look at our U S appendage management business about 25% of the revenue was from our mis.
Michael H. Carrel: As we exited the year, when you look at our U.S. appendage management business, about 25% of the revenue was from our MIS AtriClip business, and about 75% of the revenue was from our OpenClip business. And I think, given the strength of both of those franchises, our open and MIS ablation businesses would expect that next to remain relatively similar with the potential for upside, I think, for the MIS. Great. Thank you very much.
Speaker Change #114: Business and about 75% of the revenue within our open clip business and I think given the strength of both of those franchises are open and Mis ablation businesses would expect for that next to remain relatively similar with the potential for upside I think for the Ms product.
Speaker Change #115: Great. Thanks very much.
Angie Weirich: Thank you. Our next question comes from the line of Suraj Kalia with Oppenheimer & Company. Your line is now open. Hi Angie, Mike, can you hear me alright? We can hear you.
Speaker Change #115: Thank you. Our next question comes from the line of Suraj Kalia with Oppenheimer <unk> Company. Your line is now open.
Suraj Kalia: Hi, Angie Mike can you hear me all right.
Angie Weirich: Perfect. Hey, Mike, so a couple of esoteric questions. I was wondering if you could help us out. AtriClip, in general, is it on consignment or should we think about inventory also? And more specifically, as you enter FY24, just given all the dynamics and your prepared remarks, how should we think about the pricing flow through that you'll think about for FY24.
Suraj Kalia: We can hear you.
Suraj Kalia: Correct.
Suraj Kalia: Hey, Mike so couples esoteric questions was wondering if you could help us out.
Suraj Kalia: Good clip in general is it on consignment or is.
Speaker Change #116: Should we think about inventory also.
Mike: And more specifically as CEO enter FY 'twenty for just given all the dynamics in your.
Mike: Prepared remarks.
Mike: Should we think about the <unk>.
Mike: Pricing flow through.
Mike: You would think about for FY 'twenty four.
Michael H. Carrel: Yeah, on consignment, we don't really have any consignment product. That's not typically it's we're very much on kind of a use and then replaced. So we keep very, very little inventory whatsoever at sites, just enough for them to kind of plan out the procedures in the upcoming week or two. But we do not have a lot of inventory on the shelf. That's actually purposeful.
Speaker Change #117: Yes on the consignment, we don't really have any consignment product that's not typically it's we're very much on kind of a use and then replace so we keep very very little inventory whatsoever at at sites just enough for them to kind of plan out the procedures and the upcoming week or two but we do not have.
A lot of inventory on shelf, that's actually purposeful, we want to understand the demand.
Michael H. Carrel: We want to understand the demand, and we've got great inventory here to be able to supply that on a real-time basis. We've got 99.8% delivery to make sure that no patient is not being treated from that standpoint.
Speaker Change #117: And we've got great inventory here to be able to supply that on a real time basis. We've got 99, 8% kind of delivery to make sure that no patient is not being treated from that standpoint.
Michael H. Carrel: Related to price, we feel like we've got a really good pricing strategy today. We've obviously got a product on the market. Our initial one, our original AtriClip, the kind of first three generations of the product are out there today, and those are priced at a lower level.
Speaker Change #117: Related to price, we feel like we've got a really good pricing strategy today, we've obviously got a product in the market. Our initial one our original <unk> kind of that kind of first three generations of the product are out there today those are priced at a lower level. The flex V, which was our premium product today is also in the market our highest priced product on the minimally invasive products.
Michael H. Carrel: The FlexV, which was our premium product today, is also in the market. Our highest priced product of the minimally invasive products is above that. So I think we're in a really good position relative to pricing today. And we don't have any specific things to change anything on that front in the near future.
Speaker Change #117: Above that so I think we're in a really good position relative to pricing today.
Speaker Change #117: We don't have any specific things to change anything on that front in the near future.
Michael H. Carrel: Got it. Mike, in terms of Atriclep Mini, is this just a desire for product stratification? And what I'm looking at is in terms of complete isolation of the LAA, you know, you're presumably going to a smaller form factor. So just kind of walk us through the rationale for introducing Mini. And Mike, also remind us of persistent AF.
Speaker Change #118: Got it Mike in terms of it could slip many.
Mike: Is this just a desire for product stratification and what Im looking at is in terms of complete isolation of the FAA.
Mike: Presumably growing a smaller form factor, so just kind of walk us through the rationale for introducing many.
Mike: Nickel to remind us in terms of persistent AF.
Michael H. Carrel: What percent of the cases being done by AtriCure today are persistent AF versus longstanding persistent AF? Thank you for taking the time to answer my question. Sure. On the Flex Mini, we spend a lot of time, as we mentioned in our comments, we've had 500,000 implants to date, and we do a lot of work with our customers to figure out what improvements they want to have in the product. And so the biggest thing was, quite frankly, they wanted a smaller product, meaning just a smaller profile overall. That's what the Flex Mini does.
Mike: What percent of the cases being done by <unk> today are persistent AF versus long standing persistent AF.
Speaker Change #119: Thank you for taking my questions.
Speaker Change #120: Sure on the flex many we spent a lot of time as we mentioned in our comments, we had 500000 implants to date.
Speaker Change #121: And we do a lot of work with our customers to figure out what improvements do they want to have to the product.
Speaker Change #121: And so the biggest thing was really quite frankly, they wanted a smaller.
Speaker Change #121: <unk>, meaning that it's just a smaller profile overall.
Michael H. Carrel: It actually is about a third the profile of the other products, and that's the biggest benefit that people are going to get relative to using that. Also, as many of you may know, we have a V-shaped product, and we also have a hoop-like product, which is the original product that we had on the market. The hoop-like product is the one that does not have as good of a deployment as the V-clip product, and so many people wanted a hoop-like product that was smaller and had a very nice and easy and usable deployment tool with it as well. And so that was the primary feedback that we got from people, and that's effectively what the Mini brings to market. In addition to that, and probably just as important, is that the Mini is also going to be used in our – we have the Pro-V product for minimally invasive surgery, and we will have a Pro-Mini product as well that will come out in late 2025, likely.
Speaker Change #121: That's where the flex many does it actually is about a third the profile of the other products.
Speaker Change #121: That's the biggest benefit that people are going to get relative to using that also as many of you may know, we've got a V shaped product and we also have a <unk> product, which was the original product that we had on the market. The <unk> product is the one.
Speaker Change #121: That does not have as good of a deployment as the <unk> product and so many people wanted a <unk> product that was smaller and had a very nice and easy unusable deployment tool with it as well and so that was the primary feedback that we got from people and Thats effectively what the mini brings to market. In addition to that.
Speaker Change #121: And probably as important is that the mini is also going to be used in our we have the pro V product for minimally invasive and we will have a pro many product as well that will come out in late 2025 likely.
Michael H. Carrel: And that product is going to be able to go through at least a 7-millimeter, possibly a 5-millimeter trow car to make it even less invasive as somebody actually has to do the procedure from a minimally invasive perspective. So the product, by being so – its profile being so small, it can go through those smaller trow cars, and there's a big benefit to that.
And that product is going to be able to go through at least the seven millimeter, possibly a five millimeter trocar to make it even less invasive.
As somebody actually has to do the procedure from a minimally invasive perspective, so the product by being so the profile being so small it can go through those smaller trocar, if there's a big benefit on that.
Michael H. Carrel: In terms of your second question, I guess I believe you're probably talking about the convergence area in terms of the kind of distinction between persistent and long-standing persistent. Our label is for long-standing persistent. That's what we talk to them about. I'd say most of the patients fit within the long-standing, persistent marketplace. Very few are persistent patients in terms of what we're seeing. Most of the patients that we see are patients that have had failed catheter ablations, one, two, or three failed catheter ablations before they then go to a convergent or hybrid type procedure.
Speaker Change #122: In terms of your second question I guess.
Speaker Change #122: I believe youre, probably talking about the converge area in terms of the kind of the distinction between persistent.
Speaker Change #122: And long standing persistent our label is for long standing persistent that's what we talked to I would say most of the patients fit within the long standing persistent marketplace very few are persistent patients.
Speaker Change #122: In terms of what we're seeing most of the patients that we see.
Speaker Change #122: Are patients that have had failed catheter ablation, one two or three failed catheter ablation before they then go to a convergent or a hybrid type of procedure and so I believe that might be what you're referring to.
Michael H. Carrel: And so I believe that might be what you're referring to, and I hope I have answered that question. Fair enough, thank you.
Speaker Change #122: And hopefully I answered that question.
Michael H. Carrel: Thank you. This concludes the question and answer session. I'd now like to hand the call back over to Mike Carrel, CEO, for closing remarks. Great. Again, everybody, thank you for joining us today, and we look forward to having a great 2024 together. Have a good one. Bye now. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change #123: Sure. Thank you.
Speaker Change #123: Thank you. This concludes the question and answer session I would now like to hand, the call back over to Mike Carroll CEO for closing remarks.
Speaker Change #123: Great.
Michael H. Carrel: Again, everybody. Thank you for joining us today, and we look forward to having a great 2024 together have a good one bye now.
Speaker Change #124: This concludes today's conference call. Thank you for your participation you may now disconnect.